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I pulled this from CNBC, Bill Gross is one of the largest bond fund managers in the world. He is to the bond market, what Peter Lynch is to the stock market.

Partial quote:
"Long-term Treasury yields have peaked due to a complex set of "yield curve" dynamics which may "invert" standard curve relationships for years to come. ".....

"But the dramatic drop in long-term Treasury rates was almost inexplicable in the face of poor inflation news and the resultant rise in short-term rates. However, there are several major secular, rather than cyclical, explanations which suggest that the current inversion may persist for years unless the stock market crashes and forces another round of central bank easings à la October 1998.

The first of these secular changes has to do with the recently announced
Treasury buyback of longer-term debt. While that program has been in
gestation for more than a year now and was publicly announced in late 1999, Y2K fears deflected portfolio managers' focus until just recently."....

"A similar situation has existed in the United Kingdom for years. Britain's yield curve has been inverted for quite some time. The U.K. situation is related more to a need to hedge long-term liabilities than to a burgeoning budget surplus, and it is far more extreme than the situation posed by the U.S. Treasury buyback proposal. But the implication is clear: Persistent supply/demand distortions can invert a country's yield curve for long stretches of time."

What this all means to you and me I am still trying to figure out.

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Very interesting article AJ, Thanks.

Today's action indicated to me that the 30 year had gotten a little out of hand and is starting to correct. I applaud Summers announcement that they are going to buy back across the full yield curve and not concentrate on the 10 & 30 year. I am wondering why he didn't wait one more day to say that as there is a big auction of 30 years tomorrow. His remarks cost the gov't a bundle. Probably if he had waited he would have angered a lot of bond traders that he needs to sell to in the future.

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