Rose colored lenses at Merrill

What are these guys smoking?

"We think that policymakers will eventually boost the federal funds rate by 75 basis points to 1.75%. The moves are likely to come in increments of 25 basis points, in our view, and they will probably be "measured" (i.e., they won't occur at successive meetings).
Our work shows that the Fed under Chairman Alan Greenspan has not begun to raise rates until at least one million jobs have been created in a four-month span. The economy is now closing in fast on that metric; 708,000 net jobs were created in the February-April period. If the economy adds 300,000 or so jobs in May, the Fed could pull the tightening trigger at the June meeting and use Greenspan's semiannual testimony before Congress to explain the rate hike and to provide some hints about the future path of tightening.
The report for April showed healthy gains in employment, as well as increases in overall aggregate hours worked (0.3%) and earnings (0.3%). The increase of 288,000 in non-farm jobs for April followed upwardly revised readings of 337,000 for March (a revision of +29,000) and 83,000 (+37,000) for February. Because revisions tend to be pro-cyclical (i.e., if employment is rising, revisions are on the upside, and vice versa), the upward revisions support the case that the labor market is improving.
Because the funds rate tends to rise sharply during Fed tightening cycles, the yield curve tends to flatten. On average, there has been a 50% flattening in the slope of the yield curve (10-year — federal funds). The current spread between the 10-year Treasury yield and the funds rate is about 350 basis points. If an average cycle were to materialize, the slope would be cut to 175 basis points, implying that the 10-year note would end up yielding about 5.25%. "

... I'll put it on the line now: the Fed goes for at least double that meagre 3/4% and the 10-yr tops out over 6% in 2-3 years. Odds anyone?