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Monday, December 22, 2008

Ed Hyman Bullish on Bonds

Ed Hyman, head of the ISI Group, believes Treasury rate can go lower which is bullish for US Treasury Bonds according to the December 20, 2008 Barron's article "Rates May Climb, but Not by Much."
Virtually all economists sampled in our semiannual survey -- which is designed to take in the spectrum of opinions, not to be a comprehensive poll -- expect the Fed to maintain its current 0-0.25% range for fed funds (represented in the table here as the midpoint). Only a few look for the Fed to nudge the funds rate up, later in 2009.

Likewise, few seers think Treasury yields can stay at current low levels or even decline further. Yet Ed Hyman, head of the ISI Group, sees a severe global recession taking yields down from here. And Merrill's Rosenberg expects a recession more like the ones seen before World War II, which were longer and more severe than those of the post-War era.
Below is the table of rate predictions from the panel of economists Barron's surveyed for their article.

Table courtesy of Barron's

Currently, as of December 22, 2008, the 10-Year US Treasury Note is paying 2.116%

(Historical Quotes for: ^IRX)
Historical Quotes for: ^TNX)
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Click for Yahoo! 1-Yr Quotes Click for Yahoo! 1-Yr Quotes
Charts courtesy of Yahoo! Finance

More Rate Charts at:
For sure, a long period of low Fed Funds rate and low US Treasury rates will be good for homeowners. For homeowners with equity in their homes and verifiable income who wish to refinance at low rates, they should have plenty of opportunity in 2009 to do so. Refinancing at lower rates will give them more money to spend which will eventually stimulate the economy.

Homeowners who wish to refinance also need to watch the key London Interbank Offered Rate, also known as LIBOR. It is a daily reference rate based on the interest rates banks in the London wholesale money market (or interbank market) offer to lend unsecured funds to each other.

Graph of 6-Month LIBOR in US Dollars

Graph of 1-Year LIBOR in US Dollars

Graphs courtesy of

More LIBOR charts at:
Current Libor Rates at a Glance
What do you think?
  • Will rates go lower as the recession deepens?
  • Will rates stay about the same for a year?
  • Will rates rise faster than anticipated as the fiscal and monetary stimulus pushes the economy to recover quicker than many predict?
Irrational exuberance or irrational pessimism?

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