Quotably Quoted #49greenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
My predictions about PUBLIC reaction to Y2K: January 1999 --- Public mildly concerned
February 1999 --- Public mildly, but a bit more concerned
April 1999 --- Public moderately concerned
July/August 1999 --- Public has panicked. Government takes extraordinary measures to divert public attention from Y2K.
-- Kevin (email@example.com), November 11, 1998
Too funny. Yourdom's "piss-boy," LieMeister's "predictions".
-- Andy Ray (firstname.lastname@example.org), July 08, 2000
Kev managed to guess the timing pretty closely, but it was the financial world who started getting nervous and not the general public.
New York Federal Reserve Bank President William McDonough affirmed on Wednesday that the Fed had ``gone a long way'' toward addressing year-end liquidity fears that peaked in August and September of this year.
Wednesday November 17, 7:10 pm Eastern Time
Fed's Y2K liquidity measures keep markets calm
By Ross Finley
NEW YORK, Nov 17 (Reuters) - While the Federal Reserve has financial markets guessing whether Tuesday's interest-rate increase may be the last for several months, the central bank has taken great pains to quell fears about year-end liquidity.
The Fed has put in place a series of measures to make sure markets work smoothly when the clocks on the world's computers change over to 2000 and investors decide whether to hold their positions or convert to cash because of fears of technology-related disruptions on the financial markets.
New York Federal Reserve Bank President William McDonough affirmed on Wednesday that the Fed had ``gone a long way'' toward addressing year- end liquidity fears that peaked in August and September of this year.
Analysts, economists, market players and primary dealers -- the firms that conduct securities transactions with the New York Fed -- agreed.
``It's certainly been useful -- it's a valuable backstop to have there. The mere fact that the Fed has been so aggressive has been helpful,'' said Lou Crandall, chief economist at R.H. Wrightson & Associates.
Economists also say market interest in the Fed's new liquidity insurance scheme means investors are approaching the issue calmly rather than with panic.
Until the Fed came to the rescue, many investors said they were content to park money in safe, liquid short-term U.S. Treasuries and keep their money away from riskier assets such as stocks or debt from corporations and government-sponsored agencies. If that occurred, it might have led to a liquidity squeeze similar to what was seen last year at this time.
Instead, stocks have rallied and so-called spread products have also performed rather well.
But many analysts added that the bond market's resilience running into the last quarter before the date changes to 2000 is only partly a result of the Fed's preemptive measures.
Crandall cited the concern several months ago in the corporate bond and mortgage-backed markets about widening of spreads -- which indicated a preference by investors for Treasuries, securities which are much easier to turn over in the event of a crisis.
``We've seen liquidity in lots of other markets hold up,'' Crandall said. ``The corporate bond market had this expectation spreads would widen dramatically and they haven't.''
One of the Fed's main tools in fighting Y2K fears is STRIPs options -- securities that allow dealers to cash in the value of the option on one of three maturity dates offered.
This ability to exchange STRIPs for cash readily if needed is the kind of safety net prudent dealers crave as insurance against a year- end liquidity crunch. The December 30 maturity date, two days before computer clocks change over, has met the highest demand. The other two maturities are December 23 and January 6.
The Fed has auctioned five separate offerings of STRIPs since October 20, all of which have generated widespread interest, according to the New York Fed.
``There has been a tremendous amount of interest in the options auctions that have taken place,'' the New York Fed's McDonough said on Wednesday.
Analysts say that with five of seven STRIPs options auctions already behind them -- totaling just over $370 billion -- many market players who were concerned about cash on hand at year-end have already taken out their respective millennium insurance policies and are now sitting comfortably.
Citing strong demand, the Fed on November 4 added two additional STRIPs auctions to the original total of five and said it could add more if there were a further strengthening in demand.
The Fed has twice increased the amount of securities offered in individual auctions, also citing increased demand. But the amounts offered in the November 17 auctions decreased slightly, indicating the market may be more confident about year-end cash flows.
``In terms of why they were recently cut back, I would say it could reflect a number of things -- perhaps some greater confidence in the market about Y2K itself and how it will go,'' said Spence Hilton, associate vice president at the Federal Reserve Bank of New York.
In addition to the STRIPs auctions, the New York Fed also announced in September that it would begin entering into repurchase transactions with maturities up to 90 days, up from the previous maximum period of 60 days.
The Fed has already tied up approximately $30 billion in long-term repurchase agreements, a further reinforcement against liquidity concerns in the repo market.
``The only risk at this point is customers -- and by that I mean mutual funds having large withdrawals at the end of the term,'' said Marc Wanshel, economist at J.P. Morgan & Co. ``But the dealers, I think, are very comfortable.''
Vincent Verterano, head government bond trader at Nomura Securities International, said the STRIPs options provide good insurance for dealers who need extra liquidity toward year-end. But he underlined that insurance doesn't come for free.
``The Fed's going to make a ton of money on this,'' Verterano said. ``Chances are they (the options) are not going to be exercised.''
The interest rate on options is 150 basis points (1-1/2 percentage points) above the Federal funds rate, now at 5.50 percent, but traders see the insurance as cheap.
Before Wednesday's auction, the total amount the Fed had received in premiums was ``just shy of $5 million -- a little bit more with today's sale,'' Hilton said.
Many traders say that the premium is a small price to pay for what amounts to peace of mind running up to the new year.
In addition to the options auctions, The Fed now accepts a broader range of collateral for its open market repurchase operations. And it introduced in September a special facility to ease pressure on smaller regional banks toward year-end.
Despite the fact few banks have stepped forward and used the facility, Crandall and other analysts acknowledged that the very fact the Fed made the liquidity facility available to small banks if they needed it was a positive step forward.
-- (M@rket.trends), July 08, 2000.
The liquidity squeeze began in August. It wasn't the public trying to take their money out of banks, however.
ANALYSIS-Y2K fears seep into world markets at last 09:16 a.m. Aug 17, 1999 Eastern By James Saft
LONDON, Aug 17 (Reuters) - A slew of financial market distortions and anomalies in recent weeks have at last provided hard evidence that international investors are moving to price in the risks surrounding the Y2K problem.
Years of hand-wringing by pundits and politicians about millennium computer problems have until recently caused only slight and arcane moves in market prices.
But recent sharp increases in bond market credit spreads, a fresh selloff in emerging markets and the gloomy interest rate horizon implied by short-term futures market have all been at least partly spurred by the Y2K effect, analysts said.
``There is an avoidance of risk and a preference for liquidity,'' said Giles Keating, Credit Suisse First Boston chief economist.
``There has been a lot of discussion about Y2K over the last six months but nobody quite foresaw swap spreads, for example, being driven to such extreme levels.''
In the last two weeks, U.S. swap spreads have soared to their highest levels in a decade.
Benchmark 10-year dollar swap spreads now stand at 100 basis points, having touched 114 earlier in the month.
U.S. swap spreads reflect the interest rate premium a double-A-rated borrower would have to pay over U.S. Treasuries and are a key barometer of investors' overall appetite for risk.
Ballooning swap spreads are being driven in part by a glut of issuance by corporate borrowers eager to nail down financing before an expected Y2K-related year-end market shutdown.
The Y2K or millennium bug problem arises because many computers were allocated just the last two digits for the year in dates. Unless amended or replaced, computers may misread the year 2000 as 1900 or simply fail to work.
There is also evidence debt markets are increasingly anticipating a yearend scramble for cash as insurance against any potential millennium disruptions -- with investors steering clear of all bonds with coupons due in the first weeks of 2000.
A so-called ``millennium butterfly'' trade, under which investors buy December futures contracts while selling September and March, shows that Eurodollar markets are offering a 40 basis point premium to those willing to lend out money over the turn of the year, according to Steve Major of ING Barings.
On Euribor markets the premium available is 49 basis points.
Both figures are substantially higher than they were in May and have the potential to go higher, Major said.
``We are entering a surreal environment and as bankers we are paid to be prudent,'' Major said.
``Given that it is only August and we had this amount of dislocation, I would say would say the spread would go up.''
Other measures of bond investor concern around the millennium, such as a preference for more liquid ``on the run'' government bond issues, have so far shown only modest effects.
An overall measure of bond market Y2K sensitivity devised by ING shows investors are now only half as nervous as they were at the height of the Russia and Long Term Capital Management crises of late 1998, when euro conversion nerves added to uncertainty.
``We are at 50 percent of last years' peak in risk aversion, we think that it may get worse before it gets better.''
The steep central bank interest rate rises that are being discounted over the next six months in eurodollar and sterling interest rate futures contracts are also seen as at least partly a Y2K-rleated anomaly. Analysts said the strips are substantially driven by a demand for cash around the millennium rather than a prediction of central bank policy.
A selloff in emerging markets in recent weeks is also at least partly attributable to fears lesser developed areas will have difficulty hurdling yearend technical challenges and as investors who made money in these assets turn risk averse.
The MSCI-EMF benchmark emerging markets index is now about 10 percent below its recent peak and some Brady bonds have underperformed.
Even the recent run-up in oil prices has been partly explained by some as a dash to build up inventories ahead of any yearend logjams. Others say the recent surge of Japan's yen is related to a scramble for cash and the resultant repatriation of capital by the world's largest creditor.
Keating at CSFB said that the lower profile of hedge fund and bank proprietary desks after last years' LTCM fiasco has allowed price anomalies to grow.
``There is a more limited amount of arbitrage capital and that is perhaps removing the capital which would otherwise help to arbitrage the market,'' he said.
-- (M@rket.trends), July 08, 2000.
-- (BIG@TEXT.MAN), July 08, 2000.
-- - (-@-.-), July 08, 2000.
-- zoobie (email@example.com), July 08, 2000.
Funny how "kev" showed up to defend himsel.....oops, I meant "another anonymous poster" showed up to defend "Kev" with the same tripe that he posted over and over during the Stinkbomb attempt at scare-mongering.
(not too clever, my boy....)
-- (firstname.lastname@example.org), July 09, 2000.
Hey Mike, er...I mean "zoob", how you doing on that "polly gouging"?
I plan on doing most of my bartering with polyanna's.Strictly high profit,high gougeable items,t.p.,cough syrup(generic),anti diahreah (worth their weight in dark matter if the sh*t comes down)fever breakers,and of course TAMPONS!!!!a great deal of G.I.'s talk about their preparations without ever mentioning tampons,and there is a huge dependancy of just in time tampons.My wife has purchased several of the washable,reusable menstrual cup,"the keeper"they were 35 bucks.If possible problems run longterm,these will be essential,there's more about them on the y2k women site,one of the best prep sites.zoob.
-- zoobie (email@example.com), April 25, 1999.
Look at the would be sheeple-fleecer. Getting good use out of that "keeper" Mr. Cook?
-- (firstname.lastname@example.org), July 09, 2000.