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To: Alex who wrote (19870)	9/27/1998 11:02:00 AM
From: goldsnow	Respond to of 116813

Japanese Bonds Seen Rising as Strong Demand at Government Auction Expected Japanese Bonds Seen Rising as Strong Demand at Auction Expected Tokyo, Sept. 27 (Bloomberg) -- Japanese government bonds are likely to gain this week as investors expect an auction of 10- year government bonds to attract strong buying on the dim outlook for stocks around the world. The Ministry of Finance is expected to sell Tuesday about 1.4 trillion yen ($10.39 billion) of the bonds, 200 billion yen more than usual, which may have a record-low 0.9 percent coupon. ''Even so, there'll be strong demand (at the auction) because investors have sold risky corporate bonds and bought government bonds,'' said Masahiro Inoue, a fund manager at Sumitomo Marine & Fire Insurance Co., which oversees 400 billion yen ($2.95 billion) in assets. ''Cash can't go anywhere else except to bonds,'' he said. In the week just ended, the No. 203 government bond, maturing in May 2008, rose 42 yen per 50,000 yen in face value, pushing its yield down 1 basis point to 0.820 percent. Bond futures for December delivery fell 0.15 to 138.77. Traders tend to sell bonds before an auction to push up the coupon on new bonds, which will be based on the yield of previously auctioned bonds, in an effort to drum up demand. That wasn't the case Friday. Bonds posted the biggest gain in a week as slumping stocks prompted a flight to the safety of fixed-income securities amid concern about global credit risk. Watching Stocks That concern arose as Japanese bank shares declined and a U.S. hedge fund, Long-Term Capital Management LP, came close to failure. The benchmark Japanese stock index fell 3.39 percent, the steepest fall in two weeks, to 13,723.84, led by banks, after political deadlock has delayed bank reforms and on Wall Street's plunge Thursday. Meanwhile, some traders are concerned a further drop in stocks could weigh on bonds, prompting sell-off to make up losses in equities before Wednesday, when most Japanese companies close their books for the first half of the fiscal year. Early Saturday morning, the ruling Liberal Democratic Party and opposition groups reached a partial agreement on plans to revive Japan's ailing financial system. Under the accord, the government will temporarily nationalize financially troubled Long- Term Credit Bank of Japan Ltd. before looking for a buyer for the country's ninth-largest lender. The move ''won't be enough to remedy the banking system because the agreement applies only to LTCB,'' said Akitsugu Bando, a manager at Okasan Capital Management Co. ''It won't have a big impact on bonds, although it could help stocks.'' FOMC Bonds could gain additional support from expectations the U.S. Federal Reserve will cut interest rates when its policy- setting board meets next Tuesday. The U.S. rate cut ''will give us a psychological lift,'' said Jun Fukashiro, a fund manager at NCB Investment Management Co., which oversees 650 billion yen ($4.8 billion) in assets. Rate cut expectations have been sharpened by two policy gurus. Treasury Secretary Robert E. Rubin, appearing on NBC News' ''Today'' show Thursday, said the U.S. economy would benefit if the Fed cuts the overnight lending rate. On the previous day, Fed Chairman Alan Greenspan suggested the possibility of a rate cut. Some investors cited the possible Fed action as evidence the world will come under deflationary pressure, boosting the value of bonds as a haven. Analysts are also seeing a string of economic reports - including industrial production and the Bank of Japan's ''tankan'' quarterly survey of business confidence -- supporting bonds. The headline index of major manufacturers in the BOJ's September survey, due Thursday, will likely fall to minus 43, worse than the minus 34 the managers forecast in the March survey, according to a Bloomberg News survey. bloomberg.com

To: Alex who wrote (19870)	9/27/1998 11:04:00 AM
From: goldsnow	Respond to of 116813

Japanese Stocks Seen Falling as U.S. Growth Slips, 'Tankan' to Disappoint Japanese Stocks to Fall on Long-Term Capital Fallout (Update1) (Adding details on Long-Term Capital.) Tokyo, Sept. 27 (Bloomberg) -- Japan's benchmark stock index may fall to a 12-year low this week as investors brace themselves for more external shocks following the near-collapse of U.S. hedge fund Long-Term Capital Management LP. Shares in exporters such as Sony Corp., Fuji Photo Film Co. and Honda Motor Co. will be vulnerable to any signals from the U.S. stock market suggesting the locomotive of global growth may lose momentum -- or come off the rails. ''The U.S. isn't looking like the haven it was last Friday, when everybody was talking about interest rate cuts,'' said Kenji Karikomi, a manager at Daiwa Securities Co. ''Even if the Fed does play that card, what else does it have in its hand?'' Confirmation U.S. and other nations' consumers are losing their appetite for Japanese products may come as soon as Monday, when industry figures for August auto exports are released. Last month exports showed a 5.8 percent decline year on year. Still, the heavyweights of the Nikkei 225 will likely get a boost early in the week as foreign institutional investors buy shares to give a lift to the index and ''dress up'' their portfolios before the end of the month. Sony, Fuji Photo and Honda are the three heaviest members of the price-weighted benchmark. Long-Term Capital received an unprecedented $3.5 billion rescue by its lenders on Wednesday so that it can begin to sell some of its holdings and reduce its level of borrowing. The hedge fund, founded by former Salomon Brothers trader John Meriwether, racked up $4 billion in losses from bets involving Danish mortgage-backed securities and options on German interest-rate swaps. LDP, Opposition Agree Banks will likely trade mixed after the ruling Liberal Democratic Party and opposition groups reached a partial agreement on plans to revive Japan's ailing financial system. Under the accord, the government will temporarily nationalize financially troubled Long-Term Credit Bank of Japan Ltd. before looking for a buyer for the country's ninth-largest lender. Traders who had sold shares in lenders such as Bank of Tokyo- Mitsubishi Ltd. in anticipation of further price declines will come under intense pressure to buy them back on expectations public funds will be used to ease the estimated 77 trillion yen burden in bad loans. Still, the agreement -- under which the government will take over failed banks by buying their shares -- will probably do little to staunch the likely selling of bank shares in the wake of LTCB's turmoil. Shares in Fuji Bank Ltd. and Sakura Bank Ltd. tumbled Friday amid perceptions that the proposed bailout is too little, too late for floundering lenders. ''The market knew a compromise had to be reached sooner or later,'' said Tsuyoshi Segawa, a general manager at New Japan Securities Co. The compromise ''is just going to spur investors' efforts to separate the wheat from the chaff.'' Banks were among the heaviest drags on the market last week as the Nikkei 225 fell 259.32 points, or 1.8 percent, to 13,723.84. The Topix banks index fell 5 percent, more than double the pace of the Topix index of all shares on the first section of the Tokyo Stock Exchange, which slipped 23.29 points, or 2.1 percent, to 1049.93. More Numbers Nothing will be able to disguise a key indicator of business sentiment scheduled for release Thursday. Economists surveyed by Bloomberg News forecast the Bank of Japan's quarterly ''tankan'' survey will show managers are getting more pessimistic about the country's prospects for pulling out of its deepest slump since World War II. Investors say that will justify a bearish stance on steelmakers, retailers and other industries sensitive to economic cycles. ''The tankan will just provide one more reason not to buy domestic demand-oriented shares,'' said Yoshio Inamura, an assistant general manager at Tokyo-Mitsubishi Asset Ltd. ''It will be bad, but nothing that wasn't really expected.'' A more detailed picture of the economy's woes will be painted Wednesday by figures from the construction industry, which employs close to 10 percent of the working population. Figures on housing starts and construction orders for August will likely reflect weak consumer spending and capital investment, investors say. Nikkei 225 futures on the Chicago Mercantile Exchange on Friday closed at 13,855, up from 13,700 at the open. Compared with the previous day's close, Nikkei futures in the U.S. fell 245 points. <Picture> ------------------------------------------------------------------------ © Copyright 1998, Bloomberg L.P. All Rights Reserved. bloomberg.com