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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (32116)	11/2/1999 4:52:00 PM
From: donald sew	Read Replies (1) \| Respond to of 99985

Hi, As the NAZ is setting new highs, the DOW has already sold off 200+ points off of last FRIDAY's highs. Per the 60-MIN charts, it appears that the DOT was forming a BEARISH WEDGE which just broke to the downside today. Need to watch the follow-thru. There's a gap down to 720. seeya

To: Les H who wrote (32116)	11/2/1999 6:18:00 PM
From: Les H	Respond to of 99985

TALK FROM TRENCHES: GLOBAL CURVES FLATTEN ON RATE-HIKE EXPECTATIONS By Isobel Kennedy NEW YORK (MktNews) - U.S. Treasuries sagged a little Tuesday morning on jitters ahead of Mr. Greenspan's speech, but his comments were benign and prices are now grinding higher, especially in the long end. Sources say current levels, in light of the new trading range, are giving players a stronger stomach to own the long end of the market. Last week, the long bond rallied from a new two-year low of 6.40% to 6.15%. Since then, the long bond has consolidated and is trading comfortably in the 6.15% to 6.20% range. The biggest focus for the market right now is what will the central bankers do at their meetings this week? The Reserve Bank of Australia met today to decide about interest rates but the announcement will not be made public until tomorrow morning. Most analysts suspect they probably approved their first interest rate increase in five years. This could be followed by hikes from the European Central Bank and the Bank of England on Thursday. Hikes could also come from the Federal Reserve and the Nordic countries further down the road, analysts say. ECB Governing Council member and Bank of Portugal Governor Antonio de Sousa said in an interview with the German FAZ newspaper Tuesday that economic forecasts for Euroland are "now much more positive" than at any time since the last rate change on April 8. The CB Governor argued that "a central bank that under these circumstances changes its interest rates once or twice a year can hardly be accused of activism." Market players seem to think that these de Sousa comments indicate a Nov 4 rate hike is in the cards but it will be the one and only one until well into the year 2000. The German FAZ newspaper also ran an article saying unidentified central bank sources say a 50bp ECB hike is very likely this Thursday. The continuous rise in M3 is the trigger for the rate hike. Frankfurt analysts speculate that the unidentified source for this story may also be Portuguese Central Bank head de Sousa. Both FAZ articles today are by the same journalist and that makes the "unidentified sources" story unusually reliable. Back in the USA, players must get through this Friday's jobs and next week's 5Y and 10Y refunding before they get definitive word on a U.S. rate hike. Until then, curve trades are the topic. The 2Y/10Y spread was last at + 22 bps. While a few analysts suggest unwinding some flatteners at +20 Bps, most traders say the bulk of these trades should remain in place through Friday's employment report. Following the jobs report, trades should be unwound and possibly new steepeners put on to set up for refunding. Accordingly, players would likely buy 5s and 10s during the refunding or shortly thereafter to unwind those steepeners and possibly enter new flatteners ahead of the following week's FOMC meeting. Either way, longer term views call for a flatter yield curve, analysts say. Speaking of curve trades, the numbers show that flatteners have made lots of money for traders around the world recently. Take a look at this scorecard that ran on Market News International's Bullet Points product this morning: SELLING 2'S, BUYING 10's - FLATTENERS HAVE PAID OFF GLOBALLY Country: Oct 25 Nov 2 Change France.........+142....+116....-26 bps. Germany........+135....+121....-14 bps. Italy..........+151....+126....-25 bps. Belgium........+173....+150....-23 bps. Netherlands....+174....+144....-30 bps. Spain..........+179....+158....-21 bps. Sweden.........+130....+109....-21 bps. Denmark........+131....+114....-17 bps. UK.............-48.....-76.....-28 bps. Australia......+68.....+65.....-3 bps. Canada.........+30.....+28.....-2 bps. USA............+29.....+22.....-7 bps. Analysts say E-11 yield curves have definitely prepared for a rate hike and will not be surprised by a 50 bps move. Nordic countries are also definitely prepared to follow any ECB move. The U.K.'s inverted curve shows they are also prepared for a rate hike. Non-European, English speaking countries (Canada, USA and Australia) appear not to have a care in the world in regard to rate increases, however! By the way, Bank of Canada's Governor Thiessen delivered a speech on monetary policy Tuesday. Reportedly he commented that while there is no automatic rule on how to respond to a U.S. rate hike, the BOC would match a U.S. hike if U.S. economic activity posed a threat to Canadian price stability. Over in the sister market sector, Fannie Mae priced its jumbo deals today. The $5 billion 10Y was a reopening of the 10Y benchmark that sold this past August. Today's issue priced +70 versus a spread of +84.5 bps at the original sale. Fannie Mae also priced a $3 billion new 3Y benchmark at +48.5 bps. The 3Y tranche was met with very good outright interest, sources say. The 10Y tranche was done with outright interest and swaps, they say. From time to time, the financial markets talk about a Japanese practice in which corporations that do business together often hold ownership stakes in their respective companies. In recent years, those cross shareholding stakes have begun to unwind as Japanese corporations adopt a more Western approach to capital deployment. The latest example of this liquidation comes from troubled auto company, Nissan, which has announced that it will sell or reduce cross holdings in no less than 1,394 firms, according to Nikkei's interactive edition. --Robert Ramos, Dennis Pettit and Kim Rellahan contributed NOTE: Talk From the Trenches is a daily compendium of chatter from Treasury trading rooms offered as a gauge of the mood in the financial markets. It is not hard, verified news. economeister.com US OFFICIALS: TRADE DEFICIT MAKES DOLLAR DROP 'INEVITABLE' economeister.com