Zeev's Turnips - No Politics Message Board

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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Crimson Ghost who wrote (17049)	12/30/2001 8:23:53 PM
From: Justa Werkenstiff	Read Replies (1) of 99280

George: Here is the risk of junk bonds in this environment that I spoke of before now showing itself: "High yield funds had an estimated $1.4 billion outflow over the past week and a half, even though junk funds net asset values are down by 1% or so. Junk bond funds are probably a better leading indicator for the economy than stocks these days." "Interest Rate Spread Between 10 year Treasury Bonds and Fed Funds. The spread has widened between short and long term rates. Usually that would indicate concern that an upturn in economic activity could boost inflation down the road. This time, the reason bond prices plunged was pension funds dumping billions in bonds to buy stocks in October and November due to an asset allocation theory known as re-balancing. As we reported above, High Yield bonds have dropped in price recently. The spread between High Yield and short term treasuries is rising. That's more important, in our opinion, than the spread between 10 year Treasury Bonds and Fed Funds. A rising junk bond-Treasury spread says that the credit worthiness of junk bonds is coming into question." trimtabs.com

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