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

To: Les H who wrote (34987)	12/10/1999 10:09:00 AM
From: Doo	Respond to of 99985

FWIW, my price and volume work is showing huge distribution in the Nas COMP and NDX. Sentiment is at dangerous levels. I think we are at an intermediate term turn here. Just looking for the leadership stocks to show softness (you know only up 5% a day, or so <g>), and this should turn ugly. jeff Edit = Noticed the bond rally is far and away stronger than the initial push in equities. Flight before the big millenium event/non-event?

To: Les H who wrote (34987)	12/10/1999 10:29:00 AM
From: Les H	Read Replies (1) \| Respond to of 99985

Fed Opting for Flexibility Updated 9:54 AM ET December 10, 1999 By Ross Finley NEW YORK (Reuters) - With Y2K concerns adding to the usual year-end pressures on the money market, the Federal Reserve has not only been providing ample liquidity to keep interest rates from rising, it appears also to be subtly changing the way it makes sure there is enough cash available. Market observers say the Fed is buying fewer U.S. Treasury securities on the open market through outright purchases called "coupon passes" -- trades that add permanent reserves to the banking system. Instead, analysts say, the Fed is making frequent use of its new longer-term repurchase agreements to add funds. These operations -- where the Fed buys Treasuries from the market under fixed agreements to sell them back on a set date -- offer the Fed greater flexibility than outright purchases because they are only temporary additions of reserves. The longer-term "repo" operations -- set up initially to address liquidity concerns at year-end -- are also being used to address "typical seasonal needs," Peter Fisher, manager of the System Open Market Account for the Federal Open Market Committee (FOMC), said earlier this month. Since early October, the Fed has conducted nine long-term repurchase operations totaling over $48 billion -- far greater than the total amount of reserves added via coupon passes during all of 1999. The Fed has added just over $40 billion in reserves through coupon passes this year, most in the first half. "They did an awful lot (of coupon passes) this year in the early part of the year and actually in September, October and November they've done less and less," said James Blumenthal, economist at MCM Moneywatch. Coupon passes used to be the main way the Fed ensured consumers had enough cash on hand during busy holiday periods such as Easter, July 4, Labor Day, Thanksgiving and Christmas, but the change has led some market watchers to wonder whether the coupon pass is becoming passe. In the past, routine repurchase operations were confined to overnight, over-the-weekend or short-term durations. But early this year the Fed extended the span to 60 days from 15. The FOMC then decided at its August 24 meeting it would permanently lengthen the span of those repos to 90 days, effective in October. "Long-term repo agreements are really a 'quasi-pass' because most of the money that's been injected into the financial system is going to be there for two to three months," said Kevin Flanagan, economist at Morgan Stanley Dean Witter. On Thursday the Fed conducted its largest-ever fixed-system repo since the maturity period was extended in October, a 40-day operation totaling $6.205 billion. In addition to extending maturity dates, in October the FOMC also decided to allow the New York Fed to expand the types of collateral it accepts for repos, which has made it easier for the Fed to exercise them. "One of the main reasons they're doing more repos is they have also moved to add more variety to the repo collateral," said Carol Stone, senior economist at Nomura Securities International. Analysts and traders also say the Fed has preferred repos because it is reluctant to reduce the already lower supply of Treasuries on the market by buying securities outright. "There are fewer Treasuries outstanding, and they are trying to find different ways to avoid pulling Treasuries out of the market," Stone said. With the Federal government now showing a budget surplus of over $120 billion, the Treasury does not need to issue as much debt as it did in the past. "There's no question about it," Flanagan said, "the reduction of Treasury debt outstanding has played a role."