Acceptable Federal Rate Variability

L1: Acceptable Federal Rate VariabilityI”m approaching 55 and planning retirement within the next 7 months. I will requirethe majority of my 401K balance for SEPP withdrawals. My obvious goal is to maximize the max-allowable 120% Fed Term rate, reduce the portion of my 401K funds I”ll tie up for 5 yearsand I”m trying to understand: WHAT FACTORS INFLUENCE THE VARIABILITY OF THIS FEDERAL MID-TERM RATE? For example, the markets are anticipating the Fed reducing rates soon due to the sub-prime lending problems that are spilling into the market. If they do, will the SEPP-allowable interest rate also drop? I haven”t found any good explanations of this rate so that I can best judge when to jump into the SEPP-pool (bad pun intended).2007-09-13 13:44, By: 1oldguitarman, IP: [209.64.87.68]
L2: Acceptable Federal Rate VariabilityThis is something that is not easily predictable. It depends if the markets interpret the Fed as being too slow or too aggressive. Since the mid term rate reflects something around 7 years, if the markets feel the fed cuts are too aggressive and therefore inflationary, the mid term rate could actually rise, ie steeper yield curve. Of course, these markets can be rather manic over short periods in addition, so what you think might be a trend could reverse itself fairly quickly. You might check this site to follow the estimates as they develop.2007-09-13 21:17, By: Alan S., IP: [24.116.165.60]

L2: Acceptable Federal Rate VariabilityHello oldguitarman:
The mid-term AFRs are actually market based. The U S Treasury measures the actual trading prices of U S government securities each month; averages them and then develops a yield curve. The mid-term AFR is actually pegged to 7 years on that curve. Recently, these rates have been trending downward; in my opinion (LOL) caused by the flight to quality / credit crunch issues in the debt markets. I do not think the Federal Reserve, which may or may not lower thedicount ratehas much to do with the longer maturity rates instead having mch more influence on the short rates; e.g. overnight to 6 to 12 months.
If you want to track what”s going on, turn on CNBC and look at the 5 year and the 10 year yield quotes; average the two and multiply by 1.2. This will get you close; probably within 10 to 15 basis points.
TheBadger
wjstecker@wispertel.net
2007-09-14 05:22, By: TheBadger, IP: [72.42.67.59]