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

To: Les H who wrote (36070)	12/28/1999 10:34:00 AM
From: Les H	Read Replies (2) \| Respond to of 99985

ANALYSTS: FED'S SYSTEM REPOS AS EXPECTED DESPITE LOW FED FUNDS RATE WASHINGTON (MktNews) - Economists were expecting the Federal Reserve to do more system repos Tuesday, despite a low 5-3/8% federal funds rate and the large volume of repos already outstanding. The Fed did seven-day fixed repos and pre-announced six-day repos for 9:30 a.m. EST. There were $99.4 billion repos outstanding before today's interventions -- a record -- as the Fed takes precautions to assure liquidity ahead of Y2K. The Fed is adding reserves to the banking system to accommodate rising currency in circulation, economists say. It appears that Y2K precautions consist of people holding cash and foreign central banks reversing money into the Fed, both of which require repos as offsets. "The main source of this amazing reserve need is the continuing surge in currency, of which $10.4 billion flowed from the Fed to banks in the single week ended Dec. 22," said Carol Stone, an economist at Nomura Securities. Currency in the public's hands is growing at about a 23% annual rate, she noted. In addition, foreign central banks have increased their liquid investments at the Fed over the risky turn of the year. The increase in reverse repos that the Fed does with other central banks also increases the add job.