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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: Matthew L. Jones who wrote (627)	8/24/1999 3:36:00 PM
From: Les H	Respond to of 19219

You have next Tuesday as the decision date for Ecuador. I was somewhat surprised that Bonds Online is expecting a bond default as in their notes for today. Tomorrow's durable goods and existing home sales are more important than today's telegraphed Fed move. FOMC MEETING TODAY?THE EXPECTED OR THE UNEXPECTED? The much-awaited FOMC meeting has finally arrived. Bonds are fractionally lower as the outcome of the meeting is awaited. Thirty-year bonds are down 5/32, yield 5.99%. Ten-year notes are down 5/32, yield 5.91%. Two-year notes are down 1/32, yield 5.68%. The FOMC decision should be announced around 11:15 PDT. Expectations are for a rate increase of 25 basis points in the fed funds target (the rate banks charge each other). It will be very important to watch the accompanying statement for the policy bias. Market expectations are for a neutral bias. The risks are that the Fed will adopt a tightening bias, which would be very negative for the markets. If the Fed does not want to adopt a tightening bias but still wants to send the market a message, they could raise the discount rate (the rate the Fed charges banks to borrow from them). They may also issue a strongly worded statement saying the Fed will carefully watch for any signs of a pickup in inflation or other imbalances in the economy. I will alert you as to what the Fed did in my midday update. Ecuador has said they may seek to renegotiate their $6 billion in Brady bond debt. Brady bonds have the backing of the U.S. government. In the case of default, only interest payments are guaranteed. It appears highly likely that Ecuador will default. This will be the first default on Brady bonds. This will raise the borrowing costs for other emerging market countries. Domino Effect? FOMC meeting today. No economic data is scheduled for release today. Wednesday will bring data on durable good orders and existing home sales.