ong-term interest rates declining?

Bill Gross, managing director of Pacific Investment Management Company and the manager of the world's largest bond fund, had forecast in his widely read Investment Outlook that a range of 3 percent to 4.5 percent on 10-year Treasury notes would be seen over much of the next three to five years.

Morgan Stanley's chief economist Stephen Roach wrote, "At some point over the next year, I wouldn't be shocked to see yields on 10-year governments test 3.5 percent."

Declining long-term interest rates are pushing fixed-mortgage rates lower. The average 30-year fixed-rate mortgage has declined by one-half of a percentage point since March 23, from 6.15 percent to 5.65 percent. In turn, the housing boom continues as strong as ever, underscored by low mortgage rates. Until those rates increase in any appreciable fashion, the Fed's concerns about low rates fueling local housing bubbles are falling on deaf ears.

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