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To: DaveMG who wrote (14955)	9/13/1998 3:13:00 PM
From: DaveMG	Read Replies (1) \| Respond to of 152472

Could this happen here? Japan bond yields at new low By Edward Luce, Capital Markets Editor The yield on Japanese long-term bonds hit a new low yesterday in a sign that the Bank of Japan's decision to ease credit on Wednesday had the opposite effect to that intended.With the yield on the 10-year Japanese government bond touching 0.84 per cent at one point yesterday, economists said the Japanese debt markets were entering uncharted territory. The sharp rise in government bond prices (triggering a corresponding fall in bond yields) came after the bank's decision to reduce the overnight interest rate to 0.25 per cent from 0.5 per cent in an attempt to boost liquidity. "We can't recall any time in modern history that the long bond yield has dipped below 1 per cent in Japan or elsewhere," said Kirit Shah, chief market strategist at Sanwa International. "Investors are putting their money into the safest instrument, Japanese government bonds." In a normally functioning economy, much of the liquidity generated by an interest rate cut would go into the stock market in the expectation of higher corporate profits. However, economists say that Japanese investors clearly interpreted the interest rate easing as a sign of desperation on the part of the BoJ rather than as a measure which would boost activity in the real economy. "As long as there is the fear of another bankruptcy in the banking sector or of a deepening recession investors will continue to buy bonds," said one trader. "The yield could even fall as low as 0.5 per cent." The dilemma for the Japanese authorities is that negative sentiment could defeat the benefits of any further reduction in interest rates. "This is a vicious cycle for the economy," said Mr Shah, "and a virtuous cycle for the bond market." ft.com

To: DaveMG who wrote (14955)	9/13/1998 3:21:00 PM
From: DaveMG	Respond to of 152472

More From Financial Times: HONG KONG: Stability comes at a cost By Louise Lucas in Hong Kong With its big August battle over, Hong Kong is now counting the cost. The tally so far: a depleted war chest and lower interest rates that have brought stability to the markets but carry a sting in the tail. The sting is a potential drift of money out of Hong Kong dollar deposits and into US dollars. Around 56 per cent of deposits are now held in the local currency as savers enjoy the boon of 10 per cent returns. Since the government successfully imposed its new measures on the market, interest rates have dropped and the premium over US dollar rates in savings accounts is narrowing. The moves, says Simon Maughan, head of Hong Kong research at Indosuez W.I. Carr, "might totally backfire and undermine the peg because only now does the man in the street move into US dollars". The reserves are a potent weapon in the defence of its currency peg, the linchpin of Hong Kong's financial system which fixes the exchange rate at HK$7.8 to US$1. The peg is backed by a currency board, under which all Hong Kong dollars are backed by the equivalent number of US dollars. The government has refused to disclose the cost of its intervention. The only clue doled out by Donald Tsang, financial secretary, is that it is more than he expected. He admitted spending US$6.2bn (œ3.7bn) in the foreign exchange markets in the first two weeks of August. These funds were used to absorb heavy selling of Hong Kong dollars in what the government has described as a massive pan-global attack. In the following two weeks, the government changed tack and began aggressively buying shares. The share-buying binge is estimated to have cost some US$14bn to US$15bn. Further funds were ploughed into the futures market. Traders reckon the government bought around 40,000 August futures, which expired at the end of the month and generated a profit of less than US$30m. Even if the damage is limited to US$15bn worth of money in Hong Kong stocks, legislators and analysts see cause for concern. Margaret Ng, a legislator, noted that of the reserves, some US$17.5bn belonged to the Land Fund and a further $30bn belonged to fiscal reserves. Some economists argue that the hole could be twice as big as the amount spent: assuming that US dollars were sold for Hong Kong dollars to buy shares, and that the sellers - as seems to have been the case - were largely foreigners who would then convert their proceeds into US dollars in order to repatriate them. As such, says Mr Maughan, while the accounting loss is small - some US$7bn at the beginning of this week, and less as the stock market has risen - the pool of available funds has shrunk considerably. His estimate of the money remaining in liquid investments is around HK$300bn (œ23bn). Of that, HK$90bn has to be kept to back notes and coins in issuance. "If 50 per cent of all selling is going to be money removed from Hong Kong" - foreign selling - "for a year or so, then we have got another two defences of similar size to August left. The minute we have done two and we have only got one left, it's all over." ft.com

To: DaveMG who wrote (14955)	9/13/1998 3:27:00 PM
From: DaveMG	Respond to of 152472

And Still More...I'm posting all these for those of you not registered at FT.com INDONESIA: Political protests send currency sliding By Sander Thoenes in Jakarta Indonesia's rupiah lost part of its recent recovery yesterday as investors took fright from a revival of riots and student protests, fuelled by spiralling poverty and unemployment. The rupiah hit Rp12,500 to the US dollar before ending around Rp11,800, still down sharply from Rp10,800 at the start of this week. The rupiah edged close to Rp10,500 last week and traders had talked of testing the Rp10,000 level, a sharp recovery from a low of Rp16,000 in June. The fall in part reflected a rally in the dollar but was also a response to reports that thousands of people looted food warehouses in West Kalimantan, part of Borneo, while students clashed with police in Surabaya. The localised looting, riots and protests have re-kindled fears of political upheaval similar to the violence that toppled former president Suharto in May. Students broke into parliament on Monday and a few hundred protesters tussled yesterday with police in Surabaya, the country's second city, just as President B.J. Habibie opened a sports stadium nearby. Protesters demanded the resignation of Mr Habibie and a lowering of food prices. Mr Habibie urged them to be patient, warning that their rallies only exacerbated the country's woes. "If the crisis is not soon overcome, it is not impossible that it can threaten our nation's unity that we have built up with difficulty," he said. The currency had started to stabilise as Mr Habibie defied sceptics by gaining support both among the local ‚lite and among foreign donors, such as the International Monetary Fund. A steady reduction of imports and virtual cessation of corporate debt payments also lowered demand for dollars on the local currency market. But the economy kept sliding and inflation raged, notably in food prices. Mismanagement and corruption has hampered government efforts to provide subsidised food to the poor, leading officials to phase out most subsidies earlier this week and avert a budget problem. The price of a kilogram of rice is now close to a factory worker's daily wage. ft.com

To: DaveMG who wrote (14955)	9/13/1998 4:08:00 PM
From: dougjn	Respond to of 152472

Thanks. And Dave, I agree with you completely about the great need for a speedy resolution. That is widely viewed as impossible, unless Clinton resigns. Although it would certainly be an unusual way for Congress to proceed, I think a fairly speedy resolution is possible. I also think great, great pressure will be brought upon Congress to move quickly. He're how it may work. It will become clear by early next week, starting as early as tomorrow's evening news programs, that there is no great and overwhelming wave of pressure from the public for Clinton to resign, or to be summarily sacked. Some will think he should resign, others not. That's what we're hearing now. A divided view. Actually, as the press starts to digest that, and some start adjusting their own views a bit and feeding that back to public, the stay but rebuke movement may well gather strenth as the week goes on. Anyway, I think Clinton's numbers won't erode horribly, and that most will still say he should remain in office (while expressing strong disapproval). Perhaps there will be more erosion than that. The point is there won't be any tidal wave that disposes of the issue for Congress. Next some in his party may, quietly, send out feelers to Clinton on resignation, for the good of the party in the November election. He'll say no. I was elected, and I'm going to fight Clinton will say. It's who I am. I did wrong, but not impeachable wrong. There is no easy way out of this. We have a Constitution. Fight with me. They will be hard pressed to publically turn agaist him, most of them, unless the public is clamoring for his removal. So what next? Talking heads and public pressure will turn, and turn hard, on Congress to get on with it. The prosection case as been made. The media are going to start asking members of Congress isn't this now your most important immediate duty, other than passing at least a temporary budget? Shouldn't you proceed quickly? Why can't you proceed very quickly? Why can't you answer the question of whether this is enough to impeach? So vote already, judiciary committee, on whether Starr has made an impeachable case, if the facts he alleges are true. If they do vote there is enough for impeachment, assuming the alleged facts are true, and perhaps House will, why shouldn't the case then go straight to the Senate? After all, the House's role in impeachment is usually thought to be analagous to that of a grand jury. Grand jury's only listen to the prosecution. The defence makes its case at trial, if there is enough evidence for one. The main argument in favor of letting Clinton make a case in front of the House is that the grave step of voting articles of impeachment should not be taken lightly, or the country put through that trauma, without strong evidence. Well we have been put through the trauma of impending impeachment hearings for months now, so lets get on with it. A reasonable compromise might be to allow the President's attorney full opportunity to argue the legal insufficieny of the IC's case in front of the House Judiciary Committee, but not to allow cross examination there. Go through that only once. Perhaps also they should be allowed to introduce new exculpatory evidence in the House if they wish. Things like testimony from Jordan and Richardson, etc. about what the President didn't tell them to do. Compromises could get worked out. Clinton knows his real shot is in the Senate, unless there is a real groundswell of public opinion against impeachment. That is possible, and may be developing a bit, but probably not enough to stop the Republican House majority. We'll know that by the end of this week, I think. So why not a House vote before a mid October recess for elections, and a Senate trial immediately after? (And forget about the traditional recess until January?) The thing decided by Christmas. Congress, why is that not your duty to the country? After all, the President's rebuttal case is not that complicated. It's all about cross examination, and argument of the Constitutional standards to be applied. Some related thoughts elsewhere: exchange2000.com Doug