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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 (63664)	6/14/2006 12:03:34 PM
From: Mike Johnston	Respond to of 110194

Every hike in ST rates from now on is likely to send the long bond LOWER in yield Not necessarily, what if we go into a huge stagflation scenario with 9% inflation and -2% real growth ? Fed would have to hike into economic weakness and bonds would collapse. IMO we are already in stagflation. Bonds tend to rise during economic weakness to the extent that such weakness tends to be a drag on inflation. But inflation is a primary driver of fixed income and high inflation will cause bonds to drop despite economic weakness.