wmeubank@ocp.kcmo.com
P.O. Box 84901, Phoenix, Arizona
(April 30, 1997) INTEREST RATES: For now, both short-term and long- term interest rates futures have bottomed. Muni bonds are the strongest followed by T-notes. The yield curve favor's five years or less. My bias is for maturities two years or less. It is unlikely that June T-bonds will close above 106-00 anytime soon or June T-notes below 105-00. Such would be necessary for the bear's to regain control. The support zone for U.S. 30-year T-bonds at 7.25% has held. European bonds, as indicated by the Benham European Bond Fund shows signs of bottoming, boosted if the U.S. Dollar tops. In terms of earning income, Morgan Stanley Global Income Fund (MGB:NYSE) invests in dollar-denominated debt around the world and yields above 9%. The Emerging Markets Floating Rate Fund (EFL:NYSE) invests in dollar-denominated floating rate bonds and yields more than 9%. Germany Fund on the NYSE (GER) paid a 7.9% dividend. The Euro Fund paid 6% (EF:NYSE). With foreigners having bought $153 billion of U.S. Treasuries in 1996, and the stealth bear market putting potential pressure on U.S. long-term interest rates, coupled with the stealth bear market in stocks, these "cash" funds and U.S. commercial paper and T-bill market money funds may be the place to be. The trading public was too bearish on T-bonds and Eurodollars.
RECOMMENDATION--Futures investors may lightly buy June T-notes on scale down weakness with 105-23 open protective stop, holding for a test of 108-110, (Support 106-108).
R.E. McMaster, Jr.
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