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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 159.59

-3.9%

Nov 20 3:59 PM EST

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To: DaveMG who wrote (14955)	9/13/1998 3:13:00 PM
From: DaveMG	Read Replies (1) of 152472

Could this happen here? Japan bond yields at new low By Edward Luce, Capital Markets Editor The yield on Japanese long-term bonds hit a new low yesterday in a sign that the Bank of Japan's decision to ease credit on Wednesday had the opposite effect to that intended.With the yield on the 10-year Japanese government bond touching 0.84 per cent at one point yesterday, economists said the Japanese debt markets were entering uncharted territory. The sharp rise in government bond prices (triggering a corresponding fall in bond yields) came after the bank's decision to reduce the overnight interest rate to 0.25 per cent from 0.5 per cent in an attempt to boost liquidity. "We can't recall any time in modern history that the long bond yield has dipped below 1 per cent in Japan or elsewhere," said Kirit Shah, chief market strategist at Sanwa International. "Investors are putting their money into the safest instrument, Japanese government bonds." In a normally functioning economy, much of the liquidity generated by an interest rate cut would go into the stock market in the expectation of higher corporate profits. However, economists say that Japanese investors clearly interpreted the interest rate easing as a sign of desperation on the part of the BoJ rather than as a measure which would boost activity in the real economy. "As long as there is the fear of another bankruptcy in the banking sector or of a deepening recession investors will continue to buy bonds," said one trader. "The yield could even fall as low as 0.5 per cent." The dilemma for the Japanese authorities is that negative sentiment could defeat the benefits of any further reduction in interest rates. "This is a vicious cycle for the economy," said Mr Shah, "and a virtuous cycle for the bond market." ft.com

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