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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (2235)	6/9/2003 3:39:37 PM
From: Perspective	Read Replies (1) \| Respond to of 4904

<2.) The fed really has little control over longer term rates... risk spread could simply explode. If corporate bonds are 1000bps over treasuries, those stocks would get creamed.> They can have as much as they want, and already have more than you realize. They can pin the short-end of the curve, and there is always someone willing to arbitrage, borrowing money at 1% and buying 3.5% bonds. This interest rate carry trade allows the Fed to lower long rates without even buying a single long-term security. BC