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Pastimes : Ask Mohan about the Market
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To: Mike M2 who wrote (13356)1/23/1998 11:08:00 AM
From: Zeev Hed  Read Replies (1) of 18056
 
Mike, your reasoning is flawless, and that is one reason I expect to see 6% within the next two three weeks. But on balance, if indeed we maintain the same "almost" balanced budget stance as last year, (or even better as some guru's say), we will have two factors working to lower interest rates as the year progresses, the first is an excess demand of I estimate at about $200 billions, and a slight deflationary environment. In 1997, I believe we absorbed more than $150 billion of "redemptions" of bonds (the difference between the interest payed out by the Feds and the increase in total debt), and that brought interests rates down from above 7% to 5.75% (a bening inflation environment was helpful as well).

Zeev
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