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To: Giraffe who wrote (17340)	9/3/1998 12:15:00 PM
From: Alex	Respond to of 116785

TALK FROM THE TRENCHES: IT'S AN INTERNATIONAL MINE FIELD By Isobel Kennedy, Robert Ramos and Joseph Plocek ÿÿÿÿÿNEW YORK (MktNews) - It's a mine field out there, with trouble everywhere. At the forefront is Russia. Their recent near-default seems inconsequential compared to Communist leader Zyuganov's comment that "Russia could face bloodshed or civil war" if Yeltsin sticks with current PM nominee Chernomyrdin. ÿÿÿÿÿOne might expect events like bond defaults, currency controls and the sacking of free-market oriented finance ministers from the likes of Russia and Malaysia. But people don't expect the AAA rating of Japan to be in jeopardy -- it currently stands on negative alert. It's not so much the likelihood of default or financial jeopardy, as the possibility of currency adjustments and rate cuts that seem to have the rating agencies upset. ÿÿÿÿÿAnother real worry is when Hong Kong starts imposing market controls on which companies can be sold short and spends reserves to buy back their own stocks. S&P warned earlier this week further stock buying could prompt downgrades. HK is already on negative alert. And, HKMA announced today that it will no longer disclose its holdings of domestic blue chip companies even though HK law requires investors to do so when holdings are greater than 10%! ÿÿÿÿÿLTCB reported its 50% drop in NAV was largely due to losses in G-7 government securities and equity-related instruments, while emerging market losses were only 16% of the total and Russia only 10% of that. Ergo, recent market dislocations have not been confined to strange spots around the globe. Rather they have hit some of the safest and well established markets in the world. As they say, "you can run but you can't hide." ÿÿÿÿÿAlong those lines, FNMA will re-open its 4/15/03 issue today for $2-3B. Price talk +43-44. In early August the issue was reopened at +27.75 and the issue first sold last January at +19. Luckily, the flight to quality rally in Treasurys has caused the 5yr yield to rally 50 bps since early August, making the sale a good opportunity for Fannie despite the dramatic spread widening. ÿÿÿÿÿWith Colombia's de facto devaluation yesterday, world problems could deepen in South America and bring the global turbulence closer to North American trading partners. Next worries are about devaluations in Venezuela and Ecuador. Should this spill to Brazil analysts say it would be a big problem. An "emergency meeting" at the IMF to discuss Latin America, called prior to Columbia's devaluation today, has shifted the focus only slightly. The biggest exposure to Latin America at the end of 1997, according to the American Banker, included the big names: Chase at $13.8 billion, followed by BankAmerica at $10.5 billion and Citicorp at $10.2 billion, then JP Morgan at $8.9 billion. ÿÿÿÿÿOfficial U.S. data show $362.3 billion of Latin American exposure, which dwarfs the $4 billion for Russia. But about 75% of the claims represent offshore financing booked in the Bahamas, Netherlands Antilles, and the British West Indies. Of the remaining $91 billion, the biggest pieces are in Mexico ($22.3 billion) and Argentina ($8 billion). ÿÿÿÿÿNow that problems have moved closer to U.S. shores, maybe Greenspan can shed some light on its potential impact in his speech at the University of California tomorrow night. ÿÿÿÿÿTomorrow's meeting with Greenspan, Rubin and Japan's Miyazawa will of course be important and Street talk is that Japan may have a bank rescue plan in place by then. Then again, many in Street have just given up on trying to understand the modus operandi of that country. Which brings us back to why the second largest economy in the world has allowed itself to be on creditwatch. ÿÿÿÿÿBill and Hil' are finally looking good in appearances in Ireland, and there was nothing incendiary in their talks. ÿÿÿÿÿ(Talk From the Trenches is a daily compendium of chatter from Treasury trading rooms offered as a gauge of the mood in the financial markets, and should not be confused with reporting of verifiable news events. Telephones: Isobel Kennedy and Robert Ramos (212) 509-9298; Joseph Plocek (202) 371-2121; Suzanne Cosgrove and Alyce Andres (312) 214-3336) 10:07 EDT 09/03 c 1998 Market News Service, Inc. economeister.com