January Effect 2003 Message Board

STOCKTALK

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Strategies & Market Trends : January Effect 2003

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To: Londo who wrote (500)	6/8/2003 3:14:30 PM
From: RockyBalboa	Read Replies (1) of 666

I understand it now. If the (easening) bias is gone the first traders will begin trade the long end from the short side. This will happen after the last rate cut. I'm doing some backtesting using money market rates - the underlying theory is that a tight money market (ie trading above reference rates) is obviously a good pre-cursor of rate tightening. Since I'm not a profi at money markets I will ask a dealer at an interest rate house to explain me the concept how the shape of the curve changes with interest rate expectations. All I see is that the negative 3 6 and 9m spreads in the Eurodollar are still here and the curve is quite flat in the nearer maturities implying little expectation of a rate hike.

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