| The havoc created earlier this year in the us treasury market, which had its biggest single-day tumble in history, had little to do with the much-feared return of inflation. After all, notes James Bianco, research director at the institutional bond brokerage house Arbor Trading Group of Barrington, Illinois, there's little economic logic in a market that dips by almost the same amount when the department of labor's monthly employment number is 705,000 new jobs per month as when it is 150,000. That is precisely what happened in March, when t-bonds fell by a record-breaking three points, and again in April, when they dropped by a similar 2.25 points. More important than economic data, it seems, are the dominant movers and shakers in the market. Japanese investors bowing to government pressure, high-rolling hedge funds locking in arbitrage spreads and powerful central banks cementing international diplomacy, all have had a hand in the recent market turmoil. But another big player - largely ignored by professionals till now - is the one to watch going forward: the $3 trillion of us mutual funds investment. For decades these small-time individual investors played it safe in bank certificates of deposit or the fixed income markets, fearful of the risks in the stock market. |