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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Sam who wrote (2415)2/3/2000 9:28:00 AM
From: Hawkmoon  Read Replies (3) of 3536
 
Sam,

It will be interesting to see if declining 30 year bond yields will lower the rate for 30 year mortgages.

As to why we are getting an inverted yield curve where the 30 year falls below the 10 year rate is being discussed in major business newspapers like the WSJ and Financial Times.

In sum, it is due to the fact that the US is retiring ther long-term debt, issuing less and for shorter periods of time (10 years) which creates illiquidity in the 30 year bond market, but creates liquidity in the 10 year bond, if not an oversupply of bonds.

Also, it is opined that because the Fed is being so proactive on inflation, that there is less fear of it impacting those holders of long-term debt.

I also believe we're seeing a movement of capital from Europe to the US as that currency weakens, which has pushed the US dollar to its highest level in years. And that conservative money usually heads for the bond markets, espescially since they think our stock market is a bubble.

I'm sure there are others factors out there as well and I'll look forward to hearing them from others. I'm sure that there is more than one hedge fund who is sitting on the wrong side of this market and being forced to go flat or decrease their risk exposure.

Regards,

Ron
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