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To: pater tenebrarum who wrote (74225)	11/8/1999 12:30:00 PM
From: NickSE	Read Replies (1) \| Respond to of 86076

Do you have a link for Tice? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Y2K: A bond's best friend? As millennium approaches, Treasurys could enjoy flight-to-safety appeal cnnfn.com NEW YORK (CNNfn) - The bond market, suffering one of its worst years on record, may find an unlikely friend in the year 2000. Anticipating a stock market correction ahead of the millennium or a liquidity crunch that could make most securities tough to sell, analysts foresee some money moving into the relative safety of Treasurys. How much money remains unknown. But if panic strikes on a big scale, bonds could experience the kind of gains not seen since the fall of 1998, when overseas economic turmoil drew investors to government securities. This flood of funds pushed the yield on the benchmark 30-year Treasury bond to a lifetime low of 4.72 percent. (Yields move inversely to prices.) "We still think it will help Treasury bonds," Bill Hornbarger, bond analyst at A.G. Edwards, said of the Y2K effect. But the possibility of a flight to the safety of Treasurys -- whose interest and premiums are backed by the U.S. government -- remains just that: a possibility. The market has no historical precedent to which to compare the millennium. As such, the looming date sparks many theories. "We may see a lot more (money) from overseas than from the States" moving into bonds, said Bruce Alston, who manages $1.5 billion in bonds for Value Line Asset Management. "My feeling has been that there will be a shift into high quality paper." A tough year Bonds could use it. The Lehman Brothers Aggregate Bonds index, a broad measure of the performance of fixed-income securities, has fallen 0.33 percent year-to-date through October. If bonds stay flat for the rest of 1999, this will be the second worst year in the index's 23-year history. In 1994, the worst year, the index returned negative 2.92 percent. While bonds have strengthened in November, those gains would need to continue for the Lehman index to rise above 1978's 1.40 percent gain, currently the second-worst year on record. Michael Faust, portfolio manager at Bailard Biehl & Kaiser, believes Y2K will be supportive of bonds, but not a major driver. "The usual indictors of flight to quality aren't necessarily there in a big way," Faust said. One such indicator, the Swiss franc, has weakened instead of strengthened, he said. In another indicator, U.S. bonds haven't outperformed their overseas counterparts. But with the millennium seven weeks away, Y2K's effect on Treasuries may be too far away, even now, to predict. "You really can't quantify this," Faust said. Illustrating how quickly market sentiment can shift, Faust relates the story of the euro. Prior to its launch at the start of 1999, many predicted the currency would rise strongly against the dollar and supplant the yen in importance. Instead, the regional currency has lost value throughout its existence. And speaking of currencies, Marc Chandler, chief currency strategist at Mellon Bank, sees the dollar benefiting as 2000 approaches. For currencies, "the conventional wisdom is the dollar is going to have the most to gain because you want safety and liquidity," Chandler said.