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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (13356)	1/23/1998 11:08:00 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 18056

Mike, your reasoning is flawless, and that is one reason I expect to see 6% within the next two three weeks. But on balance, if indeed we maintain the same "almost" balanced budget stance as last year, (or even better as some guru's say), we will have two factors working to lower interest rates as the year progresses, the first is an excess demand of I estimate at about $200 billions, and a slight deflationary environment. In 1997, I believe we absorbed more than $150 billion of "redemptions" of bonds (the difference between the interest payed out by the Feds and the increase in total debt), and that brought interests rates down from above 7% to 5.75% (a bening inflation environment was helpful as well). Zeev

To: Mike M2 who wrote (13356)	1/23/1998 1:20:00 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 18056

Bill: In the past many (myself included) have argued that the bond market would bomb when the Japanese stopped buying. Well they stopped some time ago, but the market blew off anyway when Asia tanked. One must look at all the factors influencing bond yields, not one or two. With policymakers appaently committed to reflating Asian economies, currencies, and markets -- the environment for a major bond bull just isn't there anymore, whether or not some CBs continue to buy. In addition, the recent plunge in the dollar, surge in gold, and doubts about the Clinton Presidency do not augur well for bonds this year despite the current low inflation rate. And yes I am the same George Cole who used to write for Gold Eagle.