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To: Road Walker who wrote (128327)	2/26/2001 9:06:43 AM
From: Road Walker	Respond to of 186894

Rate bets boost short-dated US Treasuries for 3rd day By Andrew Priest NEW YORK, Feb 26 (Reuters) - Shorter-dated U.S. Treasuries rose for the third straight session on Monday, keeping yields on two-year notes at two-year lows, as investors wagered the Federal Reserve will have to cut interest rates sooner rather than later. The fate of stocks -- which traded inversely to rallying Treasuries last week -- will again be key to the performance of government issues in a week which will bring key economic data on consumer confidence and the manufacturing sector, traders said. Stock index futures were pointing to a strong start to trading for equities. At 8 a.m. (1300 GMT) Nasdaq Composite index futures were up 37 points while the March futures contract on the S&P 500 index was up 7.6 points. Plunging stocks are seen as increasing the chances that the Fed will move quickly to cut borrowing costs. Some analysts believe the Fed may even cut rates ahead of its next scheduled monetary policy meeting on March 20, repeating a surprise move on Jan. 3. ``The market's fixated on any consumer index or sentiment barometer and is latching onto anything regarding the Fed and the potential of a rate cut,'' said Brian Robinson, strategist at 4Cast Ltd in New York. ``Even if the Fed does nothing this week it is almost certain to cut by 50 basis points on March 20,'' said Robinson. The market will look for clues on policy direction in Fed Chairman Alan Greenspan's testimony before the House of Representatives Financial Services Committee on Wednesday, the second round of his semi-annual economic report to Congress. The technology-heavy Nasdaq composite index fell almost 7 percent last week and is down 18 percent since the Fed last cut rates on Jan. 31. The broader Standard & Poor's 500 fell to two-year lows on Friday. Shorter-dated Treasuries tend to benefit most from stock weakness as investors seek a short-term safe harbor for their funds. The gap in yields between 2-year notes and 30-year bonds has yawned from 58 basis points (0.58 percentage points) in mid-February to 98 basis points on Monday. This is the widest gap since November 1998 when the Fed was cutting rates to alleviate a credit crunch following Russia's financial collapse. In early New York dealings, the two-year Treasury note was up 2/32 to 100-7/32, yielding 4.51 percent. Five-year notes rose 3/32 to 103-28/32, yielding 4.82 percent. Benchmark 10-year notes were up 2/32 to 99-9/32, yielding 5.09 percent, while 30-year bonds slipped 1/32 to 98-12/32, yielding 5.49 percent. The Fed carved 100 basis points off its key federal funds overnight bank lending rate in January in two half percentage point cuts. The first of the cuts, on Jan. 3, was a surprise move between scheduled meetings. Bear Stearns chief economist Wayne Angell, a former Fed governor, said late on Friday there was a 60 percent chance the central bank would cut rates early this week in the face of falling consumer confidence, tumbling stock prices and an uncertain outlook for business spending. Fed officials have said they are closely watching for any further breach in consumer confidence, which could cripple retail spending -- the lifeblood of economic growth. This weeks's economic data includes two readings on consumer confidence, kicked off by the Conference Board's closely followed index on retail sentiment on Tuesday. The National Association of Purchasing Management's manufacturing survey on Thursday is expected to show that part of the economy is still in recession.