Monday, February 4, 2008

Budet Deficit, Stimulus package, Inflation will sap the apeal of 30y Bond

--a growing number of investors say buying the long bondis a surefire way to lose money, even as the Federal Reservecuts interest rates and Treasuries remain a haven from subprime-mortgage losses and a slowing economy. --A rising budget deficit and President George W. Bush'sproposed stimulus package of as much as $157 billion, combinedwith prospects for faster inflation and economic growth later inthe year, may sap the appeal. Falling prices will push yields to 4.70 percent by January, from 4.31 percent on Feb. 1, accordingto the median forecast of 51 economists surveyed by Bloomberg News. -- ``If the rate cuts and the stimulus package work, and theeconomy starts to stabilize or speed up again, you'll see arising interest-rate environment on the long end'' of yield curve -- Yields on 30-year bonds reached a record 15.2 percent in1981. The Treasury stopped selling the securities between 2001 and 2006 after the U.S. recorded a record budget surplus in2001.

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