Market Basics: Interest Rates to Fall Gradually
Thursday, December 9, 1999
TOKYO (Nikkei)--Short-term interest rates for terms beyond year-end should decline gradually now that city banks' year-end funding needs are becoming clearer, says Shiro Nagata of Norin Chukin Bank's money markets department.
Investors also have a better idea of the quantity of funds they have on hand to invest, so trading volume should grow, he says.
In the new year -- after the year 2000 computer problem -- no major reasons can be foreseen for interest rates to rise. The Bank of Japan is likely to continue its zero interest rate policy, he says.
For the balance of this year, investors want to take advantage of the current relatively high levels of interest rates to put funds in longer-term instruments. But city banks are reluctant to borrow longer term, and are raising funds mainly for two- to three-week terms, he says.
Three-month rates are likely to remain in the 0.2% to 0.3% range. The Bank of Japan will continue to supply ample liquidity to the market, and increase the market's funds surplus if necessary, to prevent any rise in the unsecured overnight call rate. Overnight rates are likely to hold at 0.02 to 0.03%, Nagata says.
(The Nikkei Financial Daily Thursday edition) |
