The chart below shows a history of the spread between the yield on the 10-year Treasury security and the fed funds rate starting in 1965. Also plotted in the chart is the level of the fed funds rate. Notice that when the spread moves from a negative value to a positive value, that is, when the yield curve "de-inverts," the fed funds rate has begun to fall. If history is any guide, then, don't look for the negative spread between the Treasury 10-year and fed funds to turn positive until the FOMC begins cutting the fed funds rate. Today's ADP private nonfarm payroll forecast notwithstanding, do look for the FOMC to begin cutting the fed funds rate no later than March 21, when it will become obvious even to Greg Ip's Fed sources that economic growth is at stall speed and inflation is the last war.

Chart 1
10-Yr. Treasury - Fed Funds Rate Spread vs. Fed Funds Rate
percent