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Interest Rates
Updated January 2, 2006. 10 Year U.S. Treasury - I expect the market rate on the 10-Year U.S. Treasury to rise over the course of the next two quarters. A reduction in Asian purchases of U.S. Treasuries will be the prime factor pushing the long-term rate higher. The rate on the 10-year will rise from its current yield of 4.4% to 4.5% by the end of the first quarter of 2006 and 4.65% by the end of the second quarter of 2006.
Federal Funds Rate - The Federal Reserve has raised the funds rate from 1.0% in June of 2004 to 4.25% as of today. I expect the Fed to raise the funds rate one more time before moving to the sideline. On January 31, 2006, the Fed meets for the last time under the leadership of Alan Greenspan and will raise rates for the last time in 2006. When Ben Bernanke takes the helm on February 1, 2006, he will preside over the Fed for 2006 with the funds rate remaining at 4.50%.