Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: orkrious who wrote (15285)	11/9/2004 7:39:54 PM
From: mishedlo	Read Replies (1) of 116555

Rolling Deflation? Via Email - Mish to Heinz: Watching interest rate futures I am right now wondering if we get rolling deflation with the EU next. Euribors (EU Interest rate futures) sold off the least in the latest treasury downdraft and gained almost all of it back in just two days. Eurodollars some 30 points lower on dec05 contracts and short sterling (UK) some 20 points lower. Euribors down a mere 5. Plenty of room for cuts in the UK and that is my biggest position. Reply From Heinz: re. European rates, note in this context that the first rumors of an ECB rate cut have been heard - objective: weakening of the euro. i like this rolling deflation idea...and i certainly agree that the UK is ripe for an easing cycle to begin - they started the rate hike exercise in futility, and will be the first ones to take it back (not that there'll be much of a choice imo). FF futures now indicate a likely hike in both Nov. and Dec. - if so, it'll be two steps too far - and it wouldn't be the first time the Fed got carried away only to go into emergency mode not much later. i for one am already alarmed at how flat the yield curve has become - it's already enough to set the 'imminent recession' alarm bells ringing (an inverted yield curve would guarantee it, but it's not a necessary precondition). stock market looks ripe for a pre-emptive whacking too... regards, hb

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