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by CareyBot

"Inversion" is the word blaring from all financial outlets in these holiday weeks. Ignore this word! It may matter later, or not at all, but at the moment it is a numerical curiosity. What does matter: an overlarge two-part bond-market bet. Part One: that the Fed's concluding rate hike will be one last .25 percent on Feb. 1, to 4.5 percent. Part Two: before the end of 2006, a slowing economy will force the Fed to cut its rate. The accumulating weight of chips has pushed the 10-year T-note yield down from its 4.65 percent high in November to 4.36 percent last week, in turn pulling 30-year fixed-rate mortgages down close to 6 percent for the first time since September. This "inversion" business refers to shorter-term bonds paying a higher yield than longer-term ones, which was true from ti...