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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: kimberley who wrote (23932)	8/26/1999 9:43:00 PM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 99985

The inflation indexed bonds are as they sound bonds who will increase their value with inflation. The coupon is the same as regular bonds. The main difference is that regular bonds are returning $1 for each dollar face value at a time that the indexed bonds may return $1.25 (if cumulative inflation is 25%) for each dollar paid at issuance. Therefore the lower coupon of around 3% versus the 6.125% in the recent notes and bonds. If the inflation indexed bonds trade below par this is a sign that the reported inflation is below the actual inflation. Same with 30 year bond which trades around 2.5 to 3% above actual or anticipated inflation. The time spread is around 3 to 9 months. That is why an inverted yield curve indicates recession as the anticipated inflation is going down. A flat yield curve is "soft landing" or little growth. Now with low GDP and decent spread in the bonds we have an economic slowdown but with some inflation. Therefore the negative corporate earnings growth in the GDP figures as reported to the IRS. (yeas to shareholders there are a different set of number usually misleading). Hope it helps BWDIK Haim