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To: Real Man who wrote (111441)	7/6/2001 3:50:56 PM
From: NOW	Read Replies (1) \| Respond to of 436258

the long bond wont neccesarily reflect the deflation, will it? It should if the dollar stays strong of course, but that is a big if.... So many forces at work here it is hard to know which matter: the ones that do could well be out of sight too: derivatives and the like...

To: Real Man who wrote (111441)	7/6/2001 6:45:33 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 436258

wrong. it shouldn't. Ascani's study shows that its nominal price tends to stay stable in deflations. regarding the long bond, its yield is less important to the deflationist theory than the spread between the t-note and BAA corporates. and that spread is now higher than during the '98 crisis, as the increase in default risk gets priced in. imo the bond market is a bit wary of the Fed's REACTION to the gathering deflation, which is to shove as many fresh out-of-thin-air clownbucks out the door as possible. well, the BoJ tried that too...