WSJ Economists' Forecasts
for 10-Year Yields and the FFR
In advance of today's FOMC meeting outcome and Chairman Bernanke's press conference, let's take a quick look at a couple of items in the latest Wall Street Journal survey of economists -- this one conducted June 7-11. With the recent controversy over the direction of Treasury yields, a key issue addressed in the survey is where economists expect the 10-year yield to be across six timeframes: mid-year and year end 2013 through 2015.
The survey was sent to 52 economists, 46 of whom responded, and of the 46, some skipped individual survey questions. Here is a table showing the major response statistics: Low, Median (middle), Average (aka Mean), Mode (most frequent) and High.
As we readily see from the table, the responses for mid-year 2013 fit a rather narrow range, with the median and mode about where the yield has been hovering over the past few days.
But more interesting is where the economists see 10-year yields at the end of 2015. The spread is substantial, ranging from about where we are today to a high of 5.25%. Note, however, that the median, mean and mode are fall into a narrow range from 3.5% to 3.61%.
Of course, a key driver for yield expectations is what the Fed is doing with the Fed Funds Rate. The current set rate is 0-0.25 percent with the latest effective rate of late hovering around 0.09.
Here's a closer look at the array of opinions for the end of 2015. Note the full percentage point spread between the two modes.
Here is a side-by side showing the high, low and median for the 10-year yield and FFR (Note that I've kept the same vertical 0%-to-6% vertical axis).
Market volatility has increased of late on conflicting signals from FOMC voting members and other Federal Reserve Bank presidents. Will today's news from the FOMC and Bernanke's press conference clear up confusion? Stay tuned!