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Strategies & Market Trends : John Pitera's Market Laboratory

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To: MulhollandDrive who wrote (3482)	3/15/2001 5:06:18 PM
From: John Pitera	Read Replies (1) of 33421

-------Market Summary: Another absolutely crazy day in the markets. Treasuries were modestly weaker in overnight and early morning trading on the back of the surprising strength in global equities. The equity bounce was largely a function of some much-needed contrition in the Japanese banking sector. The market continued to trade with a sluggish tone early on, completely ignoring an unchanged 275K increase in initial claims, a 0.1% in drop in both February export prices ex-ag and import prices ex-oil, as well as a jump in the Philadelphia Fed index to -23.5 in February from -30.5 in January. Despite the weakness however, the curve continued to hold a steepening bias amid ever-increasing talk of 75 bp rate cut next week. Concerns over tomorrow's release of preliminary Michigan consumer sentiment for March also proved supportive, as did the heightened carnage (and major technical breakdown) in commodities. The front of the curve eventually pushed its way into positive territory with talk of good buying in the 5s. Additional support came from the lack of an upside break in stocks, while rumors that a Washington-based consulting firm had put a 20% probability on a 100 bp easing also buoyed the market. Although longer-dated cash remained underwater on the back of steepening trades and modest stock strength, the rest of the market continued to chug higher as the day wore on. Pronounced dollar strength, particularly against the yen, encouraged more talk of yen carry trades (amid expectations of further BoJ easing on Monday). Euro weakness also seemed to channel the flight to quality bid to Treasuries with the disappointment surrounding the ECB's decision to leave rates unchanged. The front of the curve continued to outperform in late afternoon trading with loose talk of an afternoon emergency Fed meeting (yeah right!!!). A little bit of profit-taking ahead of the close did pull the market off its best levels for the session just ahead of the close.

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