Richard Hoey said, “We believe that a persistent multi-year upward drift in interest rates is now likely. The aftermath of the three decade-long decline in interest rates is likely to be labeled a secular bond bear market, but we prefer to view it in the context of the cyclical normalization of interest rates that we expect over a half-decade period.
“If we are correct to expect real GDP growth of 3% or more for the next three years, 10-year Treasury bond yields are likely to eventually normalize at about 5% at the end of a half decade-long process of interest rate normalization.
Hoey said there are five stages of monetary policy and that the Fed plans a gradual move from that first stage, being aggressive simulative, to the second stage, simulative, in response to evidence that the economy is in a sustainable expansion.
The other stages going up the scale are neutral, restrictive and aggressively restrictive.