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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (12148)	4/19/2004 11:41:42 AM
From: Wyätt Gwyön	Read Replies (1) of 110194

Last time I looked the FF rate was still the same. it is a given that the Fed sets the policy rate, but other rates need not comply. already short/long spread is at historical highs. since Fed has never maintained such a lunatic policy before since its founding, there is no real precedent for the current environment. the long yields at some point could just wave "bye-bye" and that's all she wrote. MR. Market has "raised" rates only to see them lowered within months every time the problem with relying on the repeatability of "lowered within months every time" is that each drop in the 10yr leads to more refis, which just exacerbates the inflationary pressures when things need to cool off. i think it's important to consider why these swings are so violent. they scare the carp out of me and i'm sure many a potential noteholder. frankly i want to get paid more for that level of risk.

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