A note on bonds. As long as it is perceived that the Feds will keep on raising rates to curb inflation, yields should remain close to what they are now. If the Feds decide to pause the rate hikes, long bond might actually see some selling and yields could go higher as the inflation threat increases. The bond market is pretty convinced there is an inflation threat and that so far the Feds are keeping it in check. We will see if they are right when we get the CPI and PPI next week. Just keep in mind that this is the game going on now, so don't jump to quick conclusion as to where bonds might be headed if Feds pause. They might do the reverse of what people expect and actually sell-off. I think it is more likely that Greenspan will not pause, but we will see what the data gives us the coming week. In any case, if yields start climbing, I see little reason to chase stocks based on 2006 Katrina growth. That might be already priced in, given that this rally is out of sync with current risk/reward.
This entry was posted
on Sunday, September 11, 2005 at 12:33 PM.
