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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures
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To: Patrick Slevin who wrote (40473)2/8/2000 3:16:00 PM
From: Robert Graham  Read Replies (2) of 44573
 
So there appears to be two factors at work with respect to interest rates and the bond market: the Fed surpluses which has scaled down bond sales, and the money that was thrown at the economy by the Fed which is now tightening. I suspect near term effects will have the Fed surpluses win out with respect to the bond market in terms of supply side issues, which appears to be the case so far. But as soon as the economy feels the constriction in dollar liquidity, which I think can make up a several month lag, then I think longer term yields will be impacted, with the end result being an anticipated "soft landing" of the economy, if the Fed has their way.

Just some thoughts from a person who is not an economist. Any comments? :-)

With regards to institutions getting hammered on the long bond, I understand this to have impacted many hedge funds. As far as how this impacts banks, Patrick Slevin's observation, which makes sense to me, is something that can be planned for by the banks. This will help with their management of profits: balancing interest charged on outgoing loans with interest paid on incoming money. IMO it is the sudden shifts in interest rates that they have problems handling.

Comments?

Bob Graham
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