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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: zbyslaw owczarczyk who wrote (14556)	12/2/2000 1:18:30 PM
From: zbyslaw owczarczyk	Respond to of 24042

Fed Funds Futures Signal Fed Poised to Cut Rates in 1st Quarter By Heather Bandur New York, Dec. 2 (Bloomberg) -- In a span of three days this week, investors concluded the economy had slowed enough to prompt the Federal Reserve to cut interest rates by the end of March. Futures on the Fed's interest-rate target for overnight loans between banks surged between Tuesday and Thursday, leaving the implied yield on the April contract down 18 basis points to 6.18 percent. That level suggests the Fed will cut the 6.5 percent target by its March 20 policy meeting. Signs the economy has slowed -- including a contraction in manufacturing in November and declines in home sales and durable goods orders in October -- left little doubt among many investors that the Fed will soon lower rates. ``Look for at least one rate cut'' during the first quarter, said Bruce Alston, who helps manage $1.5 billion at Value Line Asset Management. ``The economy is slowing and that trend will continue'' as consumers trim spending, he said. The Fed raised the target 1.75 percentage points in the 11- month period between June 1999 and May 2000 to temper economic growth and keep inflation in check. It has since left the federal funds target, which affects the cost of borrowing for businesses and consumers, unchanged. Some analysts say the Fed may suggest its intentions at a policy meeting on Dec. 19 by eliminating a warning that inflation is a bigger risk to the economy than slowing growth. Such a declaration ``would signal the Fed is open minded about,'' cutting rates in the first quarter, said Rory Robertson, an interest-rate strategist at Macquarie Bank Ltd. The April yield closed the week at 6.2 percent. Turnabout Until Monday, yields on fed funds futures had been stable throughout the month of November. On that day, the implied yield on the April contract was at 6.36 percent, just half a basis point less than it was on the first day of the month. Yields fell in ensuing days amid the slew of reports pointing to further cooling in the economy. Add to that the 37 percent drop in the Nasdaq Composite Index since the beginning of September, and the Fed is almost sure to cut rates, many investors say. ``If the economy continues to moderate, the Fed will have no choice but to cut rates,'' said Alan Koepplin, who helps oversee $2 billion of fixed-income assets at SG Cowen Asset Management. ``It's a very reasonable assumption for the market to make.'' Notes maturing in three years or less will benefit most from a rate cut, Koepplin said. That's why he is buying corporate notes issued by Aegon NV, the Netherlands' second-largest insurer, that mature one year from now. These notes yield about 6.7 percent, 59 basis points more than the yield on the two-year Treasury note issued a year ago that matures on Nov. 1, 2001.