This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bank of America on Bonds, Budget Fight: A Look Ahead

"The big economic damage comes from the payroll tax cut going away," Porcelli says. "It doesn't matter how much you make, if you take home a paycheck, you'll get hit by that."

If Americans spend less as a result, it's sure to turn up in the steady march of sales reports and surveys that traders monitor. That could push the 10-year Treasury yield back below 1.5% in the first few months of next year, Porcelli says. But the yield probably wouldn't fall as far as it did in July.

"People thought the world was cracking back then," Porcelli says. He can dream up a scenario in which panic sets in -- a war in the Middle East and a deep slump in China -- and traders rush into the Treasury market, but it takes a vivid imagination.

The big worry earlier this year, Misra says, was that a missed debt payment by Greece could lead to bank failures in Europe and spread to the U.S. The European Central Bank eased those fears of "contagion" when it pledged to stand behind those countries' government bonds. Problem solved -- "at least for now," she says.

So after the budget battle in Washington ends, and if Europe remains calm, things should look better. By the middle of next year, business spending, the housing market and eventually more jobs should give the economy and stocks -- and bond yields -- a lift.

Harris, the Bank of America economist, sees the economy chugging along at a 2.5% clip in late 2013. The bank predicts the 10-year Treasury rate will creep back above 2%, as big investors start shifting money out of their favorite hiding spot.

The bank says this "great rotation" from bonds to stocks should help drive the S&P 500 index past its all-time high of 1,565 to 1,600 next year. The index closed Friday at 1,414.

"There's a better story out there," Harris says, "if we can just get Washington out of the picture."

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
3 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs