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Strategies & Market Trends : Guidance and Visibility

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To: 2MAR$ who wrote (100)	6/18/2001 2:25:50 PM
From: 2MAR$	Read Replies (1) of 208838

N: DJ Treasurys -2: Steep Curve On Inflation Fears In Pipeline Although the front end of the curve managed to remain in positive territory during afternoon trading Monday, longer dated maturities succumbed to concerns over inflation and a general distaste for long-maturity investments when interest rates are moving lower. The market still remains fearful that the aggressive pace of monetary easing by the Federal Reserve so far this year, to the tune of 250 basis points with more to arrive at next week's meeting of the Federal Open Market Committee, will induce a rapid rebound in economic activity by year-end. Earlier Monday, Richmond Fed President Alfred Broaddus suggested the economy is showing more signs of weakness than of strength, but that the Fed might soon be curtailing its rate-cutting anyway, since it has done all it can do. He also noted that he sees some signs of inflation. The slope of the Treasury curve between the two- and 30-year maturities was steady at 174 basis points after steepening from 170 basis points earlier in the session. "The steepening trend for Treasurys is alive and well," said James Caron, fixed-income strategist at Merrill Lynch in New York, noting the yield for the 10-year note at 5.23% is currently well above its low of 4.69% from earlier in the year. The Treasury auctioned $14 billion three-month and $12 billion six-month Treasury bills at high discount rates of 3.435% and 3.38% respectively. These rates for both maturities were the lowest since 1994. The bid-to-cover ratios - an indication of demand - were 2.12 for the three-month and 2.16 for the six-month bills. COUPON MATURITY PRICE CHANGE YIELD 4 1/4% 2-year 100 18/32 up 1/32 3.95% 4 5/8% 5-year 99 23/32 up 1/32 4.69% 5% 10-year 98 8/32 dn 1/32 5.23% 5 3/8 30-year 95 18/32 dn 6/32 5.69% 2-30-Yr Yield Spread: 174 BPS Vs 170 BPS -By Michael Mackenzie, Dow Jones Newswires; 201-938-5451; michael.mackenzie@dowjones.com (END) DOW JONES NEWS 06-18-01 02:24 PM * end of story *

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