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

To: Les H who wrote (36074)	12/28/1999 10:46:00 AM
From: Les H	Respond to of 99985

G-Commerce genesolutions.com a subsidiary of Hyseq quote.yahoo.com

To: Les H who wrote (36074)	12/28/1999 7:57:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

TRADERS: FED ADDS TO KEEP REPO RATES FROM RISING ON Y2K FEARS By Ellen Taylor NEW YORK (MktNews) - Repo rates are expected to remain below the 5 1/2% federal funds target between now and the critical Dec. 31 financing date, traders said. That's because the Fed has added about $114 billion with longer-term repos maturing between early January and February in order to smooth trading over the turn in the calendar to the year 2000, traders said. "The Fed has added a tremendous amount of liquidity to make sure the turn is not a problem," said Forbes Hopper, a repo trader at Chase Securities. As a result of the latest Fed additions, Tuesday's overnight general collateral repo rate plunged to 4.65% from its opening rate near 5.35% by midday, traders said. "General repo rates have gone down the drain," said Ken Entler, senior vice president over repo trading at Prudential Securities. "The Fed has sucked all the collateral out of the Street and it seems to want to keep the system flooded" with cash over Dec. 31. Tuesday's Fed repos put the current cost of borrowing money to finance Treasury positions between Friday and Monday at about 5.35%, traders said. Borrowing costs on agency collateral were about 5.85%, a trader said. Federal funds earlier were quoted 5 1/2% bid to 6 1/2% offered for domestic names buying funds between Friday and Monday, according to a broker at Prebon Yamane (USA). The broker made a point of emphasizing that the numbers were just a quote only, suggesting a lot of confusion still exists about where money costs will settle over the turn. Those Dec. 31 funds rates are down sharply from the 11% that was paid on forward trades for Dec. 31 in early September. European banks are paying about 6 1/2% for fed funds over New Year's weekend. Even so, Dec. 31 is historically the most difficult day of the year for bond firms to get financed because of the heightened demand for "window dressing" funds on the last of the year to make balance sheets appear most flush. And with Y2K jitters making many participants pull in their horns sooner than usual this year, it's still anyone's guess what will happen to the cost of money over the New Year's weekend, traders said. If the rates accepted on Tuesday's over-Y2K Fed repo loans is any hint, interest rates will remain below the funds target again Friday. The Fed did seven-day repos that mature Jan. 4 with a stop at 5.41% and also six-day repos that roll off Jan. 3 at 5.30%, with the two transactions totalling about $15 billion. Moreover, traders have expected for months that a collateral squeeze would surface at year end as retail accounts grabbed all the Treasuries they could get their hands on to keep their portfolios as liquid as possible over the Y2K turn. With all the Treasuries taken as collateral on the Fed's longer repos, traders said the spread between general repo rates and funds levels would widen dramatically on Dec. 31. Repo rates on Treasuries are already trading at declining spreads compared with federal funds, about 35 basis points lower Tuesday alone. Spread could still widen more by Friday, traders said. Furthermore, repo rates on many current and off-the-run Treasuries are also expected to decline more by Wednesday or Thursday because many securities lenders and foreign central banks will be withdrawing collateral from repos ahead of Y2K to make sure they have their portfolios securely in their hands over the potentially rocky Y2K weekend. Already many current issues are trading on special Tuesday. The two-year note traded down to about 2% Tuesday on overnight repos while the 10-year note was at about 1.65%. The 30-year was also special at about 4.20% and the five-year note was just below general collateral at 4.30% at midday.