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Every year at this time we summarize the Consensus Forecasts of the Wall Street Journal's Blue Chip Economists. The 55 participants, in the July 2001 survey's consensus, projected the year-end 30-year T yield at 5.30. The Actual 12/31/01 was 5.02%. However, they missed the dramatic steepening of the yield curve, especially at the short end. The prediction for the 3-month T at year-end was 3.39% - Actual: 1.70% curve. The yield curve, which was "inverted" throughout much of 1999 and 2000, transitioned back to "normal" during 2001 (meaning longer maturities had higher yields, see chart below). Of course, the economists couldn't predict "9/11" or "the war on terrorism" and their effects on the economy. What Do They Project for 2002? The WSJ has changed the long bond Treasury used in the forecast to the 10 year instead of the 30 year. The 30 year bond is no longer issued. The consensus for June 30, 2002: 5.06%. GDP: The 4 quarterly consensus predictions 0.9%, 2.4%, 3.4% and 3.7%, i.e. an expanding economy. Several predict a negative 1st quarter GDP, but virtually all predict a year of modest growth… The bond market rallied last week after low inflation numbers (in fact, some reports indicate deflation) and a bearish speech on the economy by Fed chairman Alan Greenspan.
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Jan. 5, 2001 |
Jan. 11, 2002 |
| 3 Month T's |
5.10% |
3.62% |
1.58% |
| 6 Month T's |
4.98% |
3.54% |
1.61% |
| 5 Year T's |
4.66% |
4.85% |
4.09% |
| 10 Year T's |
4.93% |
5.37% |
4.87% |
| 30 Year T's |
5.41% |
5.74% |
5.37% |
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