OT? Interesting week ahead....keep your eyes open

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Apologies in advance....Webtv 'destroys' my paragraphs, so pay no attention to grammaticals.Tuesdays' CPI (8 am) will probably be "better than expected" based on Mondays late market rally. Gold buyers....be patient. Stock holders.... here's yet ANOTHER chance to reduce 'exposure' prior to Thursdays' FOMC meeting. The market has already discounted a 1/4pt. rise in interest rates. A 1/2pt. increase will be 'disruptive' to the financial markets. I'm betting on the latter due to the fact that Greenspan wants to get ahead of the inflation bubble prior to the 4th quarter (he doesn't want to raise rates then) and the fact that the aforementioned "Tiger Fund" needs some type of bailout. You can bet that all the kings horses, and all the kings men will be just 'ahead' of the news....you my friends, should be too.Don't be surprised when you see the positive PPI and CPI numbers 'adjusted' in a few weeks. (negatively) September will be interesting at the very least....stay tuned........


-- Keepon (vacillating@hourly.edu), August 16, 1999


Look for a Finacial Bomb Shelter........................ http://biz.yahoo.com/rf/990816/u9.html

By Isabelle Clary

NEW YORK, Aug 16 (Reuters) - The Federal Reserve Bank of New York has asked U.S. primary dealers about the reasons for a sharp widening of debt spreads in recent weeks, just one year after investors' panic rocked world financial markets, market sources said.

``The New York Fed has been asking a lot of questions about why the debt spreads and risk spreads were widening and whether this betrayed a concern in the markets,'' one senior executive at a leading Wall Street firm told Reuters. The source said the New York Fed has been asking dealers about the issue in telephone conversations held this week and last.

Debt spreads reflect the premium over U.S. Treasury yields that investors require when they buy private or foreign debt with higher risks than the global benchmark notes and bonds issued by the U.S. government.

Swap or risk spreads -- a form of bet on interest rates -- have widened in some cases more than they did a year ago.

Peter Bakstansky, senior vice president at the New York Fed declined to comment on the issue.

``We never discuss our dealings with market participants,'' Bakstansky said.


Debt spreads have generally not widened to the peaks reached last summer when fears of a potential default by hedge fund Long-Term Capital Management (LTCM) scared the U.S. financial community enough to bring about a liquidity freeze.

LTCM's woes had been brewing all year long but were heightened by Russia's debt default in August 1998 that delivered a brutal reminder to global investors that all loans -- even those issued by a nation seen as ``too nuclear to fail'' -- may be at risk.

Amid a global investors' panic, even major brokerage firms on Wall Street were reluctant to deal with their most reliable customers. This prompted the Fed to lower the federal funds rate three times between Sept. 30 and Nov. 17, 1998, to relieve pressures on strained markets.

Traders said today's reason for the lack of liquidity to finance many classes of debt may be linked to markets' expectations that the Federal Open Market Committee (FOMC) will raise the funds rate at its August 24 meeting.

Such expectations triggered a reaction typical among borrowers anticipating to pay more for credit -- they rushed to tap financial markets before the Fed's rate hike, flooding markets with heavy supply and allowing lenders to demand a premium for lesser-quality debt.


A senior Treasury dealer at another brokerage firm confirmed the New York Fed had been checking with dealers about the reason for the wider spreads and whether this revealed concern about a specific market player or class of assets.

``The New York Fed is following that. It's their role to find out what is going on in the markets and whether there are any special concerns out there,'' the dealer said.

``The spreads are wide, but the situation is of a completely different nature this year. Now, it's more a question of too much supply. It's not a story of liquidity drying up but of liquidity being soaked up. It's too much paper,'' he added.

Market players said top-tier debt has no problem finding takers ahead of a rate hike but higher-risk participants may find themselves unable to tap a dwindling supply of funds.

Carol Stone, deputy chief economist at Nomura Securities International, said the Fed will keep an eye on spreads but the situation is not serious enough to prevent a rate hike.

``Sure, the widening of the spreads remains a factor for the Fed, but it does not have the same clear implications that it had last year,'' Stone said. ``It's a very different risk profile to the debt market. Widening spreads betray added risk on some classes of assets but there is a lot of non-Treasury borrowing going on.''

-- Its (All@Conspiracy.com), August 16, 1999.

Just a minor point, but we also can look forward to the GPS rollover next saturday (about 7:00 pm EST; 2 pm HST). If it is a lot worse than planned, next monday's opening could be interesting, as well.

-- Mad Monk (madmonk@hawaiian.net), August 16, 1999.

With steadily rising oil prices for several months now, does anyone believe that inflation figures coming our of the Labor Department? They just want to keep the bubble going long enough for the insiders to sell all of their overvalued stocks and buy up all of the gold.

-- Mr. Adequate (mr@adequate.com), August 17, 1999.

Try double or triple spacing between paragraphs.

That may work for you.

-- A. Hambley (a.hambley@usa.net), August 17, 1999.

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