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Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: 8bits who wrote (2137)	6/7/2007 6:56:13 PM
From: RockyBalboa	Respond to of 6370

Yes unlike short term rates up to a year, the long end is pretty much expectation-driven. With rate hikes having ended and assurances that inflation is tame for a prolonged time, the current treasury yield - inflation adjusted - could be sufficient and statistically positive (or better, have been for some time). But your question is right - treasuries seeking a new yield level which possibly better fits to the generally perceived inflation scenario, long term. So their present value is not considered cheap anymore. Lack of returns (treasuries are sagging for some time now since having topped out at close to 120) and the volatility drives buyers into the short end - ie bills and deposits having little market risk. It is also not correlated with the rate cycle: the yield move pretty much in parallel in the US where the rate hike campaign is done for some time now and in Europe where the central bank is in the midst of rate hiking... does not make any difference.