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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (2966)	12/8/2003 12:18:35 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 110194

Well treasuries under pressure again today. And John Hussman -- whose stock and bond management record is among the best --is outright bearish on treasuries now and anticipates a major flattening of the yield curve soon. BTW such a flattening would also be bearish for gold. "The Market Climate in bonds has turned hostile, and the duration of the Strategic Total Return Fund has been reduced to less than 2 years. This means that a 1% (100 basis point) move in interest rates would be expected to affect net asset value by less than 2%. The prospect for an abrupt increase in short-term interest rates remains problematic, and with it, the prospect for an unwinding of the “carry trade” in Treasuries. The overall result is that there is a strong prospect for a flattening of the yield curve, with short-term interest rates experiencing the majority of the pressure, but enough potential for pressure on the long part of the curve to wipe out the relatively low interest income accrued by holding these bonds. With both valuations and market action unfavorable, we don't rely on forecasts of this sort, and would be in a defensive position regardless. From an analytical standpoint, however, the prospect for an abrupt flattening of the yield curve is something that we continue to watch closely, because it could have an unusually negative effect on the credit markets and financial intermediaries that depend on wide interest rate spreads. "