I just studied the forecast by the Interest Rate Committee of the Bank of America/Merrill Lynch. They do not expect rates to really increase much anytime soon. In fact, they predict the 10-year Treasury will be up modestly from 3.45% to 4.0% by year-end. They expect the Fed will start decreasing money supply in the second quarter of next year and will start raising interest rates in the third quarter.

Although it is unsaid, I suspect they are also looking for inflation to break out next year as well. They do say that one of the factors driving up rates is the perception that America doesn’t have the political will to deal with its budget deficit, which seems a bit fatalistic to me.

My take is that this is a perfectly reasonable forecast, which is the reason I’m not buying any long term bonds. If I were looking for a mortgage, I would make a decision by Christmas at the latest.

Good Job . . . BofA/ML . . . now, can you develop a user-friendly name?