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Politics : Idea Of The Day

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To: IQBAL LATIF who wrote (21766)	12/5/1998 4:22:00 PM
From: Lee	Read Replies (1) of 50167

Hi Ike,..Re:.Yield curve I thought things were approaching normal a week or so ago when the bond got back above 5.3% but due to more apparent flight to quality buying, looks like the yield curve is flattening out again. When we were at 5.25%, the ratio of fed funds to bonds was more in line with historical norms and bonds were trading on domestic events. The following URL shows the yield curve as of 12/4. bloomberg.com Also, some interesting graphs, including the yield curve are at the URLs listed below. (Fed site) stls.frb.org yield curve Some reports recently have cited decreased capital spending which was also worrisome but I see from the Fed's graphs that it's either an exaggeration or of little consequence. I was worried about the reported decrease in investment spending in the recent GDP report for that is our investment in future growth so I was glad to see the graph from the Fed site. stls.frb.org investment spending Site Overview with graphs for other economic measurements. stls.frb.org Finally, the CBOT reports that the bond was rallying on the weak NAPM report along with weak stock market action. Also keeping the bond well bid was so-called flight to quality buying on troublesome news out of Brazil and Japan. They didn't mention a multi-year low in CRB prices however, and this also would buoy the bond. Plus the dollar was gaining back on the yen and mark. cbot.com cbot.com The ensuing rally in stocks undermined some of the flight-to-quality appeal that had boosted Treasury prices recently. cbot.com March Bond cbot.com FF over bonds cbot.com ff over bonds weekly I think the Fed will ease again this month if we continue to see the spread between corporate issues and bonds widen. (This may also have something to do with the decreased capital investment as new loans for big projects are still restrictive). Also, the recent manufacturing data may trump the strong jobs report since manufacturing is more long term and the jobs report comes at a seasonal high anyway. Hope this isn't too much and is what you wanted. Regards, Lee

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