Fed will cut rate next year for sure
Posted by Frugal on September 28th, 2006
Better open your Bank CD now rather than later. If you don’t need to use the money, and don’t want to put the money into stock market or any investment, I would suggest you to open a CD that is longer than 1 year. Here is the link for 1-year CD and 2-year CD from BankRate.com. The interest rates in money market accounts will immediately come down once Fed starts to cut short term interest rates.
The current bond yields are indicating a strong possibility of interest rate cut at the end of this year or early next year. 10-year treasury bond yield is down at 4.6%, while 30-year treasury bond yield is at 4.73%. The Fed short term rate however is at 5.25%. Make any sense to you? This is the so called inverted yield curve which is forecasting an economic slowdown and possibly a recession if Fed doesn’t cut rate soon.
It looks like we are back in the goldilocks economy. Everything appears to be great. $US is not falling, but actually rallied. Mortgage rates will be down because of the fall in treasury bond yields. The bond yields can allow the stock market to sport with a higher P/E ratio, relative to the unattractive bonds. Crude oils has fallen big time, and same for gold, while stock market indexes are setting new yearly highs if not all time high. I almost want to say that it’s too good to be true. Assuming that the price for commodity stays down, and Fed can stop housing to slide, we will have a soft landing.
According to Hoenig, one of the Fed officials, inflation has peaked, and will decline going forward. But I am not so sure at all. Yes, Fed wants us to believe that inflation has peaked and is totally under control. With such belief, bond market can stay strong, and Fed doesn’t need to keep increasing interest rates.
I believe all signs are still pointing to greater inflation. That is the only way out for a debtor nation like US. The only game in town is the confidence game. Keeping the confidence up, then US dollar and bond markets will be strong, and therefore stock and housing market will not weaken too much.
More related posts:
Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb
September 28th, 2006 at 1:32 pm
Yes, I definitely agree with you on this one. I think a hold the next meeting then next year lower rates.. I am going to lock in rates with a one year but I am going to wait as long as I can because then maturity date will come longer next year…
September 29th, 2006 at 9:22 am
Rates are already going down slightly Garrett. Now should be the time. Don’t wait. There will not be another rate hike.
September 29th, 2006 at 11:54 pm
I agree.. I just seen EmigrantDirect drop their rates. Now EmigrantDirect.com won’t let me access my money WHAT THE HELL!!
I want to lock in an eloan.com 18 month cd ASAP..
September 30th, 2006 at 10:32 am
I’m considering taking down Emigrant Direct’s ad. I personally don’t have an Emigrant Direct account simply because of laziness and because my cash in bank is actually pathetically low (they are all in brokerage accounts).
I’ve come across some complaints. I don’t think I want to put something on my site that could generate a lot of complaints.
CD rates are going down too, together with money market rates. As I said, it’s a good time now to put away anything that you don’t think you will be investing into stock market or precious metals or anything that you would want to use.
October 4th, 2006 at 7:23 pm
What are your thoughts on ibonds, they are currently paying 1.4 percent fixed rate above inflation, I am thinking of purchasing 2 bonds at 1000 each, do you feel the nov ibond rate will be higher due to the downward turn in inflation. I have purchased a couple of ibonds over the past year at 1.0 percent and 1.2 percent, I am thinking of holding them for 3-5 years, and like the deferred tax.
October 11th, 2006 at 8:29 am
I never purchased any such bonds whether it’s I-bonds or regular bonds, because I believe bonds will become the games for losers due to higher inflation (and that includes I-bonds too when CPI are a little massaged by government).
I have a bond investment series “Intro to Investing in Bonds”. You can click on
http://www.1stmillionat33.com/category/investing/bonds/
Sorry for the late reply.