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Tuesday, September 06, 2005


Edward Hugh

Just to clarify one issue, I don't think the Fed will pause, I just don't think it would be any big issue if they did. This is the thing about the measured pace, you miss a month and it doesn't really do much to the upward rise. How's that for hedging your bets :).

What I am signalling loud and clear is that you also need to keep an eye on euro bond markets. The German 10 year bund hit an all-time low of 3.05% this week. This must put an anchor on 10 year treasuries since the yield cannot go up that far without attracting money from europe which brings it back down again. So this - the ceiling on treasuries - is really what I envisage will stay Greenspan, or his replacement's, hand. January isn't it when the change comes? Well the newcomer will have a really nice one to work with if he faces an inverting yield curve just as he draws up his seat.

Edward Hugh

James Hamilton is also in the probable pause club:

"Finally, there is the ever-present question of what will the Fed do? I think-- and hope-- that they will take this as an opportunity to pause and see what these developments will bring. The market-- which thinks but does not hope-- seems to believe that they might do just that."

Dave at MacroBlog is watching, taking note, but not I think coming down on one side or the other. Since he works for the Cleveland Fed this is undoubtedly very proper of him.

All in all, it's a close call.

Nike Air Pippen

I like your post. thank you.

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