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

To: LLCF who wrote (2823)	6/28/2003 4:11:46 PM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 4907

Hi DAK, ... in the last quarter I believe the demand for long end is as much risk arb and speculators assuming the Fed will start to buy, as it is people thinking they are a good investment. I'm not so sure that this belief is what has actually happened. I know of very, very few bond speculators and risk arbitrage players, but the ones that I do know of have made a point of avoiding the bond largely because (up until this past Thursday morning) the Fed had not signaled a long term commitment to a low interest rate, and these guys are risk averse fearing that interest rates would increase and bond values plummet. That said, what I do see happening is that the equity mutual funds have been buying bonds to put cash to work, as over the past quarter many of the funds have seen a resumption of net increases in funds flow, and most of the "investment worthy" stocks are/were already sitting at premium values compared to where they were back prior to March. So the bond purchases are/were a temporizing action until the quarter ends, at which time these funds will have to find someplace to park the cash, or continue to buy the bond. Over the past week or two, we've (likely) seen some of the equity funds, in particular those that haven't kept up with their brethren this past quarter, buying into stocks as a window dressing effort for the quarter ending in June. As soon as that's over (Monday afternoon), I suspect we could see some of these overpriced stock positions decline as the window dressing is undone. Just my opinion, though. I can't quote any responsible "experts" for the idea... KJC