Whee, this is fun. Long term interest rates are headed back down, and are once again on a collision course with short term rates. According to Brian Wesbury, Fed Funds are headed toward 5% by spring ‘06. The ten year note on the chart below looks like it’s headed for 4½%. Something’s gotta give.
With short-term rates so close to long-term rates, the best return on federally-backed “debt instruments” might be for me to overpay my taxes—based on the short-term-rate-plus-three formula I think I spotted in this section of the code. If you know anything about that, please send me an email and clue me in.
Here’s the chart; click to enlarge.
