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Tuesday Interest Rates and the US Dollar - Oct 1 2008 8:53AM

 October 01, 2008 08:52 AM

I have never seen or heard the TBill rate discussed in the media as often as I have these past two weeks.  For good reason though.  So I don't have anything to offer you don't already know.  It is encouraging to see the rate back up at the top of the range.  But at this level its still obvious credit stress and fear remain, and a Fed Funds cut is likely.

Staying with the TBill.  Here is a look at the long-term.  The TBill peaks were buy signals for the stock market until late 2000 when the peak switched to a sell signal.  Anyone have a theory why the trend changed?  A trend from inflation to deflation?  Leverage?

The bond/stock ratio doesn't favor stocks at the moment... not by a long shot.  How much further does this ratio have to go?  It doesn't look ready to change trend anytime soon to me.  According to Cramer, there is always a bull market somewhere.  This ratio says that right now, the bull is US Treasuries.

Top quality corporate bonds are getting killed lately, another bad sign for this stock market.  But the corp/treas bond ratio could be a good early signal that the bear market is over based on the last recession.  The ratio bottomed and recovered in late 2002 when stocks were still bottoming.


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