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To: pater tenebrarum who wrote (56240)	7/10/2000 12:04:17 AM
From: Tunica Albuginea	Read Replies (3) \| Respond to of 99985

heinz, Re: " Inverted yield curve, most reliable tool for recessions; yet nobody's paying attention to it". I heard somewhere that one reason it is inverted may be somewhat artifactual and thus relatively unreliable. They stated that the long 30 year Bond is down because Government has been reducing debt and buying them. Investors are afraid that they will disappear as investment vehicles and thus have recently been buying them heavily which of course increases demand and price but lowers the yield. That allows for a higher short term bonds yield which then allows for the yield inversion. Of course as you say, that may be only partially the reason for the inversion. It is also interesting that Larry Summers aka" Uncle Sam ", by buying 30 yr Bonds and lowering rates is going exactly opposite where Uncle Al wants to take rates to. Explanation: " we just lookin' out for Aaaaaaalgore here !!!!" ".... keep it floatin' guys.......!!!" :-))) Chicco ------------------------------------------------------- Message #56240 from heinz blasnik at Jul 9, 2000 8:51 PM i don't know why it's not completely inverted yet, but it probably has to do with the many leveraged positions engaged in various yield spread trades. but obviously, since the Fed funds rate is currently the highest point of the yield curve, we can safely ignore this little dip in the 3month to 1 yr. maturities and declare the curve inverted. funny enough, NO-ONE is worried about this, and yet, it's the most reliable tool for forecasting recessions there is.