If the economy slows down, if housing moves back down, then at some point late in 2006 the Fed starts to lower rates. That's why a 10-year note yield at 4.55 percent is a decent value as opposed to overvalued.
I think ... that the economy is declining,
thoughtful, secular approach to the chairmanship, focused on the long-term evolution of the U.S. and the global economy.
What it suggests this time is a 2 percent economy in 2006, as opposed to a recession.
It is telling us that we have a slower economy ahead.
The Fed knows that the economy is in terrible shape and that they must bring down short-term rates to the level of inflation. If inflation keeps coming down, the Fed, to a certain extent, has to chase inflation.
By the time 10-year and 2-year Treasuries reach parity, as is almost the case now, the economy is typically slowing and the Fed is at or near the end of its tightening cycle, ... We are due for what appears to be a 2 percent or less Gross Domestic Product growth rate in 2006, a rate sure to stop the Fed and to induce eventual ease at some point later in the year.