Thursday, June 28, 2007


The Fed is adding large doses of cash for quarter-end demand. We need the Fed's help as credit spreads continue to widen during the sub-prime mortgage mess.

3 comments:

Anonymous said...

Which benchmarks are you using for source data in the graph and why?

Corporate Baa vs 10 year
or
Merrill-Lynch High-yield Constrained Bond Index vs 10 year

thanks
tommy_b

Jim said...

Hello Deborah,

The yield curve is flattening (which is bad), but the 10yr. note yield is heading for 5% or lower (which is good). Which do you feel is more important for the stock market?

Best Regards, Jim P.

Deborah said...

Dear Tommy,
I use the Merrill-Lynch High-yield Constrained Bond Index because it is more volatile, changes faster and is more clear. It represents the most dangerous investments at the edge of the financial system where the flight to quality starts.

Dear Jim, I think that the flattening is more important. I do, however, see your point about the good news inherent in a low yield on a ten-year. It may be too late for sub-prime borrowers who are in an untenable situation regardless of that rate.

All my best to you both,
Deb