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Investment Watch

June 16, 1996

Forgive the bond market for being fearful. Government reports last week seem to support investor jitters about inflation: During the first five months of the year, consumer prices rose 4.1%, up from 3.2% in the first five months of 1995 and 2.5% for all of the last year. Even excluding food and energy, inflation's pace is 3% so far this year--if that holds, it will be the highest level since 1991. On the other hand, most analysts think the risk of a surge in inflation hardly exists, with both wages and prices under fairly strong pressure. Bondholders,lenders and other investors remain in a quandary, and the markets reflect it.

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