adios
02-23-2004, 05:33 PM
Sir Alan gave a speech today urging mortgage lenders to offer more product alternatives. IMO basically said consummers are paying too much for 30 year fixed mortgates. I don't think his comments were made in light of expectations of higher inflation any time soon.
This is Goldman Sachs take on the 10 Yr. Treasury. I found this exceprt to be basically inline with my thinking:
Goldman said a set of assumptions held by consensus is already well known and ``amply discounted in the yield curve.'' Hatzius said the market is assuming an improved economy, rising budget deficits and a Federal Reserve trying to generate inflation.
The market being the discounting mechanism that it is has already anticipated the factors mentioned in the above statement.
Goldman Sachs Goes Against Consensus on Yields: Chart of Day
By Thomas R. Keene
Feb. 23 (Bloomberg) -- Goldman, Sachs & Co. economists have fforecast that the yield on the U.S. Treasury 10-year note will fall to 3.90 percent by the end of this year, saying the Fed will keep rates at 1 percent ``well into 2005.'' That projection contrasts with a Feb. 9 Bloomberg survey of 60 economists, which showed a median 4.85 percent yield for the fourth quarter, and a Jan. 3 Wall Street Journal survey of 54 economists, which also forecast rising yields. The 10-year note ended 2003 at 4.27 percent and was 4.07 percent this afternoon.
"The logic for this near unanimity in favor of higher rates is straightforward, though ultimately flawed," wrote Jan Hatzius, senior U.S. economist at New York-based Goldman Sachs in a monthly report to clients dated Feb. 13. The chart of the day {97 <GO>} shows the 25-year history of the note's yield. The linear-fitted trend has a downward slope and stands at about 4.3 percent (the red line). The yield history is bracketed by a September 1981 yield of 15.65 percent (the yellow rectangle) and a recent low of 3.17 percent (the orange rectangle).
The year-end Goldman Sachs estimate is shown at 3.90 percent (the green dot). The Feb. 9 median yield of the Bloomberg survey is 4.85 percent (the blue dot).
`Amply Discounted' Assumptions
Goldman said a set of assumptions held by consensus is already well known and ``amply discounted in the yield curve.'' Hatzius said the market is assuming an improved economy, rising budget deficits and a Federal Reserve trying to generate inflation.
The Goldman Sachs team, led by William Dudley, chief U.S. economist, disagrees with the consensus. The team forecast that continued low inflation and low interest rates will advance bond prices and lower yields, saying the Fed will keep rates at their current levels into next year.
Dominic Konstam, head of interest-rate research at New York based Credit Suisse First Boston, agreed with the lower-yield forecast. In a weekly report to clients, he said the Fed can ``freely delay tightening,'' given 4 percent or lower real gross domestic output. Konstam even said lower rates ``might come back on the agenda if inflation continues to fall.''
This is Goldman Sachs take on the 10 Yr. Treasury. I found this exceprt to be basically inline with my thinking:
Goldman said a set of assumptions held by consensus is already well known and ``amply discounted in the yield curve.'' Hatzius said the market is assuming an improved economy, rising budget deficits and a Federal Reserve trying to generate inflation.
The market being the discounting mechanism that it is has already anticipated the factors mentioned in the above statement.
Goldman Sachs Goes Against Consensus on Yields: Chart of Day
By Thomas R. Keene
Feb. 23 (Bloomberg) -- Goldman, Sachs & Co. economists have fforecast that the yield on the U.S. Treasury 10-year note will fall to 3.90 percent by the end of this year, saying the Fed will keep rates at 1 percent ``well into 2005.'' That projection contrasts with a Feb. 9 Bloomberg survey of 60 economists, which showed a median 4.85 percent yield for the fourth quarter, and a Jan. 3 Wall Street Journal survey of 54 economists, which also forecast rising yields. The 10-year note ended 2003 at 4.27 percent and was 4.07 percent this afternoon.
"The logic for this near unanimity in favor of higher rates is straightforward, though ultimately flawed," wrote Jan Hatzius, senior U.S. economist at New York-based Goldman Sachs in a monthly report to clients dated Feb. 13. The chart of the day {97 <GO>} shows the 25-year history of the note's yield. The linear-fitted trend has a downward slope and stands at about 4.3 percent (the red line). The yield history is bracketed by a September 1981 yield of 15.65 percent (the yellow rectangle) and a recent low of 3.17 percent (the orange rectangle).
The year-end Goldman Sachs estimate is shown at 3.90 percent (the green dot). The Feb. 9 median yield of the Bloomberg survey is 4.85 percent (the blue dot).
`Amply Discounted' Assumptions
Goldman said a set of assumptions held by consensus is already well known and ``amply discounted in the yield curve.'' Hatzius said the market is assuming an improved economy, rising budget deficits and a Federal Reserve trying to generate inflation.
The Goldman Sachs team, led by William Dudley, chief U.S. economist, disagrees with the consensus. The team forecast that continued low inflation and low interest rates will advance bond prices and lower yields, saying the Fed will keep rates at their current levels into next year.
Dominic Konstam, head of interest-rate research at New York based Credit Suisse First Boston, agreed with the lower-yield forecast. In a weekly report to clients, he said the Fed can ``freely delay tightening,'' given 4 percent or lower real gross domestic output. Konstam even said lower rates ``might come back on the agenda if inflation continues to fall.''