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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (4389)	4/15/2004 11:31:23 AM
From: mishedlo	Respond to of 116555

Freight Rates Weigh Heavily on Bonds [couple snips some nice charts in the article - mish] thestreet.com The dollar's decline was precipitated by the Federal Reserve's aggressive rate-cutting campaign. For whatever criticisms we can level at the Fed, we cannot quibble at its success in forestalling deflation and in setting the stage for the strong commodities and freight markets that followed. However, the prospects for higher short-term interest rates in the U.S. may lead to a stronger dollar and an end to the interventions. As suggested here in early January, a dollar rally may do more to torpedo the bond market than actual credit tightenings by the Federal Reserve would warrant. Unlike the FOMC's semantic virtuosos, freight rates give clear and unambiguous warnings. A further decline in the indices should lead to lower commodity prices; this signal is being confirmed by the lackluster performance of the Goldman Sachs Resource index and its ETF, the IGE. While this may be welcome in many quarters, if it is accompanied by prospects for higher short-term rates, we could be in for a massive deleveraging of fixed income investments that would make last week's REIT selloff look like a day at the beach.