Mike Walsten
We've been concerned the damage done to the credit markets last year would take a long time to heal and that the recovery in the U.S. economy would be slow and muted. But this story in the Wall Street Journal (December 22, 2009) suggests the bond market is telling us otherwise.
Bottomline: The yield curve (difference between short-term -- usually the 2-year T-note -- and long-term interest rates -- usually 10-year notes -- on government securities) has steepened to levels not seen since 1992 and 2003. In both of those years, the steepening yield curve signaled a strong, sustained economic recovery following a recession. In both cases, it took the Federal Reserve a year or more to respond to the growing economy by lifting interest rates.
If the market is again correct, this suggests the recovery may prove stronger than we expect but interest rates may remain restrained well into 2010, which is supportive to land values.
Click here to read the story.
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