Debate Week is almost over, and Gov. Bill Clinton of Arkansas is the winner. That's great news for Democrats, of course, and a drab message for Republicans, but it helps explain the bond market's behavior in October.

Clinton's mastery of the presidential campaign accounts for the market's modest setback for the past two weeks, the beginning of an assessment of what a Democratic administration will mean for investment assets.

To oversimplify, Wall Street has concluded that Clinton will go on to win the election on Nov. 3, and it's time to switch from bonds. A Clinton administration will mean the end of deflation and a dangerous push for economic growth. As of last Friday, this macro outlook has lifted the yield on long-term Treasury bonds to 7.54% from 7.30% at the beginning of October.

If this view is accurate, the fixed-income market is at an important turning point, the end of a bull market. And there's no question but that the 12 years of Ronald Reagan and George Bush have been golden for bonds.

The Treasury sold 15 3/4% bonds during Reagan's first year in office, and those bonds last week traded at 163, driven up in price by one of the greatest fixed-income bull markets in American history. Only the decades-long decline in yields from 1920 to 1946 (much of it caused by the Depression) was stronger than this modern bull market.

This extended decline in bond yields, like other great bull markets for bonds, was based on deflation and recession. Now, by all accounts, almost nothing can stop Clinton from winning, and it is assumed he will work to speed the economy while reining in inflation. The fixed-income markets are betting that he can't do both.

That's why long-term Treasury bonds, which yielded 7.25% on Sept. 10, have moved back above 7.50%. All the talk of long Treasury bonds yielding 7% or even less has been replaced by predictions that long Treasury yields will go back to 8% or even more.

There's a tiny chance that President Bush, like Conservative John Major in Britain last March, may whisk victory from the jaws of defeat; as Yogi Berra said long ago, and as the Atlanta Braves proved Wednesday night, it ain't over till it's over. A November surprise would revive the bull market, at least at first.

If the election comes out as the polls predict, though, the outlook for the credit markets will become even more interesting. Then the determining question will be, Can Clinton make his detailed plans work to create jobs, cut federal payrolls, reduce the federal deficit, improve education, provide affordable health care -- all the while keeping prices under control?

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