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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: TAPDOG who wrote (2065)9/26/1999 12:43:00 PM
From: Henry Volquardsen   of 3536
 
As you point out I think it is more of a supply demand situation related to the relative 'shortage' of Treasury paper.

I do not think the Fed will restrain from tightening because of credit spreads. The arguement being made by people such as the one you reference is that wide credit spreads are a result of underlying concerns on credit quality and a tightening would put them over the edge. I believe the Fed recognizes what the dynamic in the spread markets is and can look underneath the numbers to get a good picture of what the market is telling it. As such I think they will see that the market is responding to supply demand and not nerves. The Fed will tighten if they continue to see strong economic numbers.
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