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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 672.07-1.7%4:00 PM EST
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To: j.o. who wrote (18035)6/21/1999 11:28:00 AM
From: pater tenebrarum  Read Replies (3) of 99985
 
j.o., even a 1/2 or 2/3 retracement of the move in bonds is possible; i guess this will depend on the jobs,ppi and cpi data over the next two months. a flattening of the yield curve is possible if the economy should slow down a bit - of course, that is something we can not take for granted, especially if the stock market remains strong. a Fed tightening would still push money from the shorter end of the curve to the longer end, as debt markets start to discount an eventual slowdown. the only worrisome aspect is the huge amount of corporate paper that is coming to market. it remains to be seen if the market will be able to digest this without hiccups. on the other hand, the budget surplus should free up funds from the treasury market, so maybe the concerns over corporate paper are overblown. a more pronounced slowdown in the economy however would lead to large-scale dumping of corporate bonds and a huge rally in treasuries, similar to what happened last fall. by that time the stock market should be in trouble as well. conclusion: should the stock market tank and the economy show signs of a drastic slowdown, maybe even an incipient recession due to Y2K, the bond will not just retrace some of it's losses, but actually make new highs.

regards,

hb
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