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To: AllansAlias who wrote (21363)	11/16/2001 1:30:52 PM
From: Paul Shread	Read Replies (1) \| Respond to of 209892

I'll ask one more time - where is that money going? It's not going into stocks. Bond traders do not appear to be buying into the economic recovery idea - unless they're putting that money into corporates...

To: AllansAlias who wrote (21363)	11/16/2001 1:33:39 PM
From: UnBelievable	Respond to of 209892

Very Interesting Since Today's CPI Data Was For More Deflationary Than Expected Those bond traders must feel fairly confident that the Fed will be able to deal with the deflationary pressures which may be in the economy now. <gg>

To: AllansAlias who wrote (21363)	11/16/2001 1:36:14 PM
From: heehee1	Read Replies (2) \| Respond to of 209892

AA..<Nope, something else going on here.> What do you think is going on if not recovery?

To: AllansAlias who wrote (21363)	11/16/2001 1:41:24 PM
From: dawgfan2000	Respond to of 209892

Some commentary at Bondtalk.com, from yesterday: 2:08 PM The Treasury market continues to get walloped for a number of rational reasons, a number of which I cited at the start of the week. First, the string of military victories in Afghanistan is reducing the crisis premium built into bond prices over the past two months. The victories will likely reduce the public's anxieties and fears and thereby remove a major obstacle to economic growth. Fed rate cuts, after all, won't put people back in airplanes; reduced fears and anxieties will. Second, the persistent strength in equities, led by cyclical industries such as rail, trucking, retailers, and basic materials companies, is clear evidence that investors are beginning bet on a cyclical rebound in the economy. The strength in equities is increasing the degree of competition for capital. Investors may have become somewhat disenchanted with the paltry rates of return on money market assets. Indeed, there's roughly $5 trillion invested in savings deposits, CDs, and money market funds earning negative returns, when inflation and taxes are substracted. Third, crude oil notwithstanding, industrial commodity prices have tilted higher after falling to mult-year lows just recently. The Journal of Commerce index, for example, a key gauge of industrial materials prices, has gained about 2% over the past week. A rise in industrial materials prices would suggest that a rebound in manufacturing activity is on the horizon. Fourth, the bond market's failure to react positively to the biggest drop ever recorded in the PPI, it was a red flag that suggested a large degree of bullish news is already factored into prices. Fifth, the Treasury's $23 billion of 5- and 10-year notes sold last week settle today and both issues are decisively underwater. There's a tendency for selling to beget selling if the new issues are in the red. Yields on both issues have increased by about 50 basis points over the past week. Sixth, the bond market has shown signs of being severely overbought. The 10-day average of the call/put ratio on T-bond futures, for example, was at its highest level in at least four years last week. Seventh, mortgage-backed portfolios that loaded up on Treasuries to hedge against big increases in pre-payments their mortgage-backed securities (prompted by soaring mortgage refinancing) are now selling some of their hedges as yields rise (with mortgage rates set to rise, pre-payments will fall; mortgage-backed players will therefore be excessively long unless they sell some of their hedges). Eighth, spread products have become in vogue in recent days, as yields on low-grade credits have narrowed sharply versus Treasuries. The S&P speculative-grade credit index, for example, has narrowed sharply in recent days, narrowing more yesterday than on any day since January 3rd, when the Fed delivered a surprise inter-meeting rate cut--the Fed's first of the year. The narrowing in yield spreads between low-grade credits and Treasuries clearly suggests that risk-aversion has fallen somewhat. As I said on Monday, the pendulum has swung against the bond market in favor of the economy, stocks, and spread products. The above factors would have to develop further, however, in order for current market trends to persist. bondtalk.com