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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (5197)	1/16/2004 9:01:10 AM
From: mishedlo	Read Replies (2) \| Respond to of 110194

My Euribor (euro equivalenet to eurodollars) futures are up big this AM! LONDON (Dow Jones)--Euro-zone government bond prices are higher midday Friday on speculation that the European Central Bank will cut interest rates in February. Dealers said rumors in the futures market that a major European bank was forecasting an ECB cut next month helped spark a wave of speculative buying, which then triggered buy-stops as recent sellers were forced to cover short positions. At 1130 GMT the March bund future on Eurex was up 0.42 at 114.89 with resistance seen in the 114.95 area. The benchmark 10-year cash bund was trading at 101.16, up 0.37 to yield 4.10%. At 1125 GMT the euro was quoted at $1.2499, down from $1.2570 late Thursday in New York and well off its all-time high of $1.2900. However, it is still above perceived fair value, quoted by some analysts at $1.10-$1.20. Beyond intervention in the foreign exchange market, one way the ECB could deal with the euro's restraining impact on growth would be to cut the repo rate from its current 2% level. Earlier Friday, ECB Chief Economist and executive board member Otmar Issing reiterated that the central bank wasn't ignoring the euro's strength. "We aren't indifferent, we are concerned," he said, echoing a statement from ECB President Jean-Claude Trichet after meeting the world's top central bankers in Basel earlier this week. However, asked whether the weakness of the German economy, which contracted by 0.1% in 2003, was a result of the euro's strength, Issing said the data only confirmed what has been known for a long time - that Germany has been in a prolonged period of stagnation. "This has nothing to do with the development of the euro," he said. Dealers said the markets had got excited after speculating that the ECB will use a rate cut to accompany verbal intervention. The next monetary policy meeting is scheduled for Feb. 6. In terms of economic data Friday, the focus is again on the U.S. with industrial production figures and the University of Michigan sentiment survey due at 1415 GMT and 1445 GMT respectively. Economists expect a 0.4% rise in December production and the preliminary Michigan reading on consumer sentiment to rise to 94.0 from 92.6.