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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Peter Singleton who wrote (63046)	6/23/1999 1:58:00 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

Peter, I think we have a tale of two markets: Treasuries and everything else. Cos. are not really making money and mortgage lenders are getting smaller spreads, so they are both forced to hit the debt market with their hands out. That is killing those issues and this pressure simply will not let up in our current era of profitless prosperity. Treasuries, on the other hand, are getting somewhat scarce. New issuance growth is at its lowest level in several decades. And with T-Bonds, you have unquestioned quality at a time when a huge default is almost certain in the corporate/financial area. That creates the wider spreads between corporates/mortgages and Treasuries. IMHO, the corporations are too weak to pay very high interest rates. They have no pricing power. This will cause even more downgrades in debt ratings, which, again, raises rates. I don't know how much of this corporate pain AG can take before he chops the stock market off at the knees, forcing a flight to quality. He has already accepted a lot more dangerous corporate leverage than I expected him to take. Short term, I think we see a 25 basis point rise from the Fed, and a T Bond party right after that. Longer term, I see Treasury rates much lower as the economy shows its true, extremely weak nature. That is obviously a contrarian view as many believe the govt.'s reported numbers.