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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Joan Osland Graffius who wrote (240)	12/29/1997 2:41:00 PM
From: Zeev Hed	Respond to of 9980

Joan, yours is a wise question beyond my limited intellectual abilities, I think that Sankar understands these issues much better than I and would deffer to him if he has the time. Zeev

To: Joan Osland Graffius who wrote (240)	12/29/1997 3:02:00 PM
From: Defrocked	Read Replies (1) \| Respond to of 9980

Joan, an excerpt from an earlier post of mine on yield curve. FWIW. "Some argue that today's yield curve is different since recessions are usually brought on by Fed tightening,absent now,which resulted in previous YC manifestations. My reply is that the YC does reflect an unexpected monetary contraction resulting from the devastation of money,credit and real assets in the Far East which is being transmitted to the US markets through the movement of international capital. Moreover, remember that the Fed would have increased rates at either the Nov./Dec. FOMC meetings so they also view the Far East deflation as a form of tightening." Since that prior post, yield curve as measured by 10Yr/3Mo spread has rebounded to 37bps from 24 bps. Note that bonds have not rallied today despite 40 cent drop in crude to 17.80 and CRB,grains generally down. While press may be agog about Korean debt restructuring one should keep eyes on Japan and China IMHO. Moreover, the US investment bankers have yet to price and sell the repackaged So.Korean debt which may look much like overcollateralized junk portfolios sold as asset-backed securities. Any buyers out there??? Tens of billions coming your way with potentially +400bp spreads. BWDIK.