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Treasuries on the Decline


As we speak, the iShares Lehman 20+ Year Treas Bond (TLT) is declining towards a test of the 50 DMA, now at 88.64, which if violated, should trigger downside follow-through to the rising 200 DMA, now at 87.86. Truth be told, until Tues. (day before the FOMCstatement), I was expecting the TLT's to climb towards a retest of the Feb. high at 91.26. Instead, we have just the opposite situation: a decling TLT (rising long rates), at the same time the Fed appears to be telling us that economic weakness should moderate inflationary pressures. For the time being, the MARKETS are warning us that they dont think the Fed necessarily is undertaking the proper course of action, or that the Fed is between a rock and hard place now. As the WSJ suggested yest., the Fed cannot afford to aggrivate the fragile housing sector on one hand, and yet it suspects inflationary pressures have not yet been sufficiently quashed-- but cannot do much about it. If such perceptions intensify, then let's expect the long end of the bond market (prices) to continue to decline (rates rise). MJP 3/23/07 2 PM ET 88.79
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