To: Hawkmoon who wrote (5613 ) 2/20/2002 9:35:12 AM From: John Pitera Read Replies (1) | Respond to I've got an insurance post for Tim, Archie MacAllastar mentioned a couple of Insurance stocks for his roundtable picks.The Nikkei, which is inversely correlated with Treasury prices, posted its biggest loss in two months last night on concerns that the government is not doing enough to combat deflation and help banks get rid of non-performing loans. Of course, it was just last week that we suggested that a sell-the-fact mentality could engulf yen-denominated assets in the wake of the visit to Japan by President Bush. As we expected, the summit between Bush and Japanese Prime Minister Koizumi failed to produce any new measures to get the markets excited again about reform, while not surprisingly, officialdom discounted the likelihood of any nearby injection of public funds into the banking sectorlowering their overweight position in corporates to 2% from 4% as recent developments such "Enronitis" has changed the landscape in the market. Furthermore, while they do recognize that over the medium term spread product should be the outperformer (something we agree with fully), their near term bias is that a higher risk premium should be built into yields. For color and support of this thought, we would point out that current Lehman Brothers Credit Index at 170 bp is off the recent tights in late January at 157 bp, but well inside the early November '01 wides at 190 bp. So, to this end, we would not be surprized to see a slight move wider before yields reach levels that are more truly attractive to investors.nervousness on the part of developers who seem to be increasingly burdened by excess capacity, particularly at the high-end level of the market. increase in the bank's monthly JGB purchases to Y1 tln from the current Y800 bln , while Hideyuki Aizawa, head of an LDP task force on anti-deflation measures, argued that Hayami and the rest of the gang should not sit on their hands at the policy meeting later this month. As we have argued before however, the BoJ will likely remain reluctant to further ease monetary policy without the promise for more credible reform from the government. debt-servicing pain of high real interest rates. Japan cannot continue to muddle along. Deflationary spiral is a done deal no matter what path is chosen. Huge implications for the rest of the world if Japanese banks withdraw their capital from global markets
