What if they changed the color to fuchsia?

The Beige Book, which is really a collection of anecdotes submitted by the various Fed regions every six-weeks, paints a picture of a slowing but still benign economy. The Treasury market likes it, as the 10-year is up about 1/4 point. We are also getting a fair steepener here, with the 2-30 year slope steepening 4bp on the day. FF futures are rallying.

I wrote recently that I was long-term bullish but I was looking for a better entry point, around 5.50%. I'm backing off that. The data is softening faster than I thought it would, and now I can't see the Fed going past 5.50%, and I suspect they'll take 1-2 hikes back sometime early next year. That means we're looking at FF around 5.00% in 1Q 2007. I can see the 10-year at 4.75% or so at that point. If for some reason they do go past 5.50%, then the odds of a serious recession go way up, and ultimately long rates will fall even further.

I'm still near-term bearish. The 10-year is overbought and ripe for a negative surprise. That's entirely technical, though. Now my entry point is probably 5.15%-5.20% depending on how things develop.