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Bond market is "spooked" by several factors of significance:
1) record levels of liquidity as measure by M3 money supply growth; recent
readings are in never-seen-before land. The implication is that this will
spark the economy that will eventually and inevitably cause a rise in the
demand for money.
2) continued strength in the real estate and home building sectors of the
economy...again, an anomoly that has not occurred in past recessions. This
implies a strong DEMAND for longer-term money.
3) potential government deficits caused by the yet-to-be-calculated cost of
the US war against terrorism. Implication is future government financing in
the way of additional DEMAND for longer term money to fund a long term war.
This causes a "crowding-out" effect with the private sector.
4) the negative effect on the federal budget deficit of new impending "a
little bit of pork" legislation to relieve unemployment and to jump-start
the economy. Again, more demand is implied.
*any* of these are bad news for bonds.
Together, they spell disaster.
> -----Original Message-----
> From: nmsmith@xxxxxxxxx [mailto:nmsmith@xxxxxxxxx]
> Sent: Friday, December 21, 2001 5:52 PM
> To: omega-list@xxxxxxxxxx
> Subject: Off topic Bonds direction
>
>
> Would anyone care to share an opinion on what is happening with 10 and
> 30 yr. bonds at the moment.
> They seem to be in a bit of congestion and today Friday they closed
> near their lows.
> I was wondering if the low closing before the weekend
> has some significance, or if I missed some news.
>
> Thanks
> NS
>
>
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