Long Term Bond Forecast

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Interest rates are carving a bottom as I had indicated on December 29th 2024. The fed has been holding off cutting rates and they will soon realize that they are ONCE AGAIN late to react. We will then see many successive rate cuts which will drive interest rates down rapidly. The Fed always follow the 2 year yield. Currently, the 2 year is at 3.88% which is roughly 50 bp below the average Fed rate. This indicates they are lagging the bond market and will have to follow.

The economy is starting to show signs of slowing down. I would go as far as saying that it is in recession. It won't be acknowledged until several months later but that too is always the case. As the economy continues to slow down, we are very possibly heading towards a second Zero Interest Rate Policy (ZIRP) in the months to come.

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