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To: jim kelley who wrote (76720)	11/5/1998 12:36:00 PM
From: Lee	Read Replies (1) \| Respond to of 176387

Hi Jim,..Re:.What is happening with the interest rates on bonds and T-bills? They seem to have been creeping up higher than I would have expected. I think we're getting back to normal, at least a semblance of normal. When we got down to 4.7% on the long bond, it was because of 'flight to quality' buying. bigcharts.com economeister.com US TSY MKT OUTLOOK: BULLISH ON WEAK STOCKS, SHAKY WORLD MKTS Treasuries have continuously received a flight-to-quality bid which has propelled the market to record highs --most recently after the bail-out of Long-Term Capital Management. economeister.com US TSY MKT ENDS OFF HIGHS BUT UP SHARPLY ON WEAK STOCK MKT The 30-year cash bond marked a 3:00 p.m. EDT close at an all-time low yield of 4.712%. "The flight-to-quality bid remains," said a cash trader with an investment bank in New York. He added he was "seeing fairly active short-Treasury buying from foreign accounts. Obviously there's some flight-to-quality going on." Also, from all that we have seen from the eco numbers, most recently the GDP of 3.3%, our economy is not weak, only slowing slightly. In this context, (strong eco data), yields of 4.7% don't correlate with with the actual eco numbers. dismal.com But we may see more easing because of the credit crunch/liquidity problem which, in my understanding, is a bigger threat to our economic well being going forward. I'm looking for equilibrium rates around 5.75% for the current data but yield is distorted by foreign buying. This is at the least a big disturbance to so-called equilibrium levels, so I have no idea if we would eventually get there. Hope this is clear.<vbg> (heavy stuff) Regards, Lee