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Strategies & Market Trends : ahhaha's ahs

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To: ahhaha who wrote (1034)	2/15/2001 1:30:12 PM
From: ahhaha	Read Replies (1) of 24758

The FED is in "ga ga" land. Today with fed funds at 5 5/8 where one would expect them to be after the last several days of considerable matched sales, the NY Fed entered the market and bought RPs at a scale similar to what they previously sold. Also, today they did another coupon pass. They're sterilizing their own sterilization. Better put, they're trying to lock in 5 1/2%, but they're reacting to their own actions. However, the sales discovered how sensitive the market is to marginal withdrawals. What does that tell you about the absolute state of the market in money, if it's inelastic wrt marginal supply but elastic wrt marginal demand? That's too tough for most of you to answer. The answer is private lenders are concerned about principle erosion in the future due to potential inflation. Don't believe me? Please explain how coupon passes after a net zero of contingent actions are not resulting in a soft market for fed funds.

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