January Effect 2003 Message Board

STOCKTALK

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Strategies & Market Trends : January Effect 2003

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To: Londo who wrote (91)	1/6/2003 10:13:41 PM
From: RockyBalboa	Read Replies (1) of 666

I believe 2 factors (or perhaps 3,4) are contributing to that yield pickup: -weak dollar prompts selloff of low yielding TSY future and swap into euro debt (which actually outperformed the tsys these days) -Bush talk of larger tax cuts at the expense of the federal budget makes budget deficits more likely in the coming years, so there may be need for additional financing -Looming issue of 30year material may ask for a higher yield, old 30y bonds were scarce -a coming iraq or north korean war should send up stocks and so more money might come out of the bond side I have not really followed the homebuilding sector very much, but perhaps we have seen a peak in refinancing older mortgages. With interest rates so low, the new business should go for a while. But if it really falters and demand shrinks then this will cool off the new financing. I agree that sharply rising interest rate will cool off new demand as well. I wonder how the mortgage houses will cope with declining prepayment rates then.

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