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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Joan Osland Graffius who wrote (104686)5/24/2001 6:56:40 PM
From: Don Lloyd  Read Replies (3) of 436258
 
Joan -

I am looking at the best, most likely and worst case for the long bond interest rate during this "inflation worry period". Right now my conjecture is 9% best, 12% most likely and 18% worst case. My problem is the parameter of consumer debt and its effect on this number, since I have no idea on when they will have to shut down spending which should be the point that inflation will turn. Anyone have any ideas on this attempt to guess how far the long bond can sell off.

The fact that the FED is getting close to the end of the rate reduction period and the fact that there is a supply problem for the bonds would seem to indicate that the rate upside is likely limited to single digits at worst if financial markets survive. When the FED turns to tightening there will be a strong tendency for a flattening of the yield curve, also limiting long bond rate upside. JMO.

Regards, Don
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