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To: Alex who wrote (21345)	10/10/1998 9:23:00 AM
From: goldsnow	Respond to of 116762

I am surprised by continious indiferrence by North American analysts and leaders to Euro affairs...not that is supposed to be the last safe haven, but perhaps the only hope.....Italian situation is the latest example, that can explode the whole EMU concept, yet we get nothing but shoulder shrug... BOND MARKETS-Fire sales replace safe-haven flows 11:03 a.m. Oct 09, 1998 Eastern By Clelia Oziel LONDON, Oct 9 (Reuters) - Global bond markets were savaged on Friday as funds liquidated massive positions and analysts said the safe-haven bubble that pushed prices to record highs may have burst. Trades said the ''flight-to-quality'' phase was over and adopted ''fire sales'' as the new phenomenon in bond markets, while economists advised investors to stick with the shortest dated assets like Treasury bills. ''It's fairly strange stuff,'' said Keith Macintosh, gilt trader at Barclays in London. ''Because of the leverage, if some of these funds have to come in and take off a 20,000 lot position you can end up with a move that is far cry from what you rationally think should be happening,'' he said. The carnage saw the yield on the U.S. long bond surge above five percent only days after it touched a historic low at 4.70. U.S. and European bond futures were down by more than 200 basis points across the board as stock markets rebounded. As if thatr was not enough, investors were also worried that Italy may back pedal from convergence towards European single currency after the resignation of Prime Minister Romano Prodi. While this meant interest rate cuts will be put off in Italy, Portugal's central bank managed to slash its repo rate by 50 basis points to four percent following a similar move by Spain earlier this week. Both Italian BTPs and Portuguese bonds were steady versus Bunds. The impeachment inquiry into U.S. President Bill Clinton was also causing some nervousness. Analysts were unable to predict how many more losses were on the cards as hedge funds and troubled financial institutions hit markets with a wholesale unwinding of positions to cover debts amid a bruised dollar. ''What we don't know is how many bad positions there are out there. It's probably some trillions and it's going to take a while to unwind those,'' said Stephen Lewis, chief economist at Monument Derivatives. ''Long-dated, medium-dated and even short-dated bonds are seen as being insufficiently liquid as compared with very short-term bills and money market assets,'' he added. ''It's probably right to get as short as possible.'' That is the opposite of investors' activity in recent months. They had piled into the long end of U.S. Treasuries, German Bunds and British gilts, flattening and even inverting yield curves. On Friday, the curves had begun to steepen as these trades were reversed and short-dated bonds outperformed those with longer maturities. A correction in bond markets was long due. A steep rally this year exceeded forecasts by a long shot, as yields set record lows almost daily amid a meltdown in emerging markets. But Friday's panic selling was also overdone, analysts said, arguing that bargain-hunters should soon dig some value out of the rubble. But for the time being, a global credit crunch and liquidity squeeze would dictate the market trend. By 1435 GMT, the 30-year benchmark Treasury bond was quoted at 105-29, down 1-23/32 from the prior close in New York, yielding 5.11 percent. Ten-year Bunds were down 1.12 points, but gilts were the worst hit, down 2-31/32 on the 10-year. Bunds outperformed Treasuries and most European debt. Bond markets' fortunes turned on Thursday when the dollar slumped to a 15-month low against the yen amid hedge fund liquidation. Markets were betting on lower U.S. interest rates and that Japan would finally be able to repair its ailing banking system after months of procrastination. The dollar's plunge to below 112 yen on Thursday also raised concerns that Japanese investors would unwind their Treasury holdings -- estimated at some 20 percent of the total market. But the dollar recovered to around 117 yen on Friday. ''I think we are seeing a turnaround here in the core government bond markets,'' Neil MacKinnon at investment consultants Burke & MacKinnon told Reuters Television. A 16-year bull market in Treasuries was coming to an end, he said. Lewis of Monument Derivatives said even further cuts in interest rates may not repair the damage. ''It is by no means certain in current economic circumstances that if central banks slashed short term interest rates this would help the long end very much, because the feeling is, certainly in the U.S. and UK economies, inflation is not dead and it could come back as a consequence of interest rate action,'' said Lewis. Italy's Prodi lost a confidence vote in parliament by just one vote amid political chaos after his hard-left allies withdrew support from the centre-left goverment. President Oscar Luigi Scalfaro may now call early general elections or ask Prodi to muster a new majority. Danyelle Guyatt, strategist at Deutsche said this should not be detrimental for EMU convergence trades. ''It won't lead to an unravelling of the EMU process but it will certainly lead to a widening of spreads intially,'' she said. Copyright 1998 Reuters Limited.

To: Alex who wrote (21345)	10/10/1998 10:59:00 AM
From: goldsnow	Respond to of 116762

So some people took profits in Gold..how sweet it sounds "profits" amid losses everywhere else..Anything changed ? Russia's Lebed Increases Pressure On Yeltsin 10:14 a.m. Oct 10, 1998 Eastern By Timothy Heritage MOSCOW (Reuters) - Regional governor Alexander Lebed increased pressure on President Boris Yeltsin Saturday, saying he could face a revolt if he does not respond clearly to ordinary Russians demanding his resignation. Lebed, a probable presidential challenger, said he was alarmed by the Kremlin's silence over protests across the vast nation last Wednesday calling for Yeltsin to resign. ''The high and mighty silence of the Russian authorities after the protest action on October 7 could lead to a revolt by the people,'' Lebed told Interfax news agency. ''Instead of peaceful protest actions, we could get something much worse.'' Lebed, a former Yeltsin security adviser who is now governor of the Krasnoyarsk region in Siberia, did not say what form a revolt might take but urged the Kremlin to do more to hear out the complaints and proposals of ordinary Russians. He has a vested interest in criticizing Yeltsin because he is expected to stand in the next presidential election, due in 2000. But calls for Yeltsin to resign have become widespread as Russia slipped into economic crisis in the past few weeks. Yeltsin, 67, said Thursday he planned to see out his term until mid-2000 but has not commented directly on the protests, which the trade union organizers said attracted 25 million people although police say only 1.3 million took part. Despite the unions' bravado, the turnout was lower than they and the opposition Communist Party had hoped. Even so, Yeltsin has been weakened by Russia's worst financial crisis for years and has made few public statements of substance on problems such as the collapse of the rouble against the U.S. dollar and the government's default on some debts. Russia's new prime minister, Yevgeny Primakov, has promised to wipe out the wage and pension arrears which partly prompted last Wednesday's protests but has failed to produce an economic plan a full month after he was confirmed in office. Primakov met education officials Saturday to discuss the problems of one of the sectors that complain of underfunding in the past few years. ''The government attaches great importance to sustaining Russia's intellectual centers and intellectual potential without which it is impossible to raise the economy and pave the way for our development '' Itar-Tass news agency quoted him as saying. Interfax news agency quoted Education Minister Vladimir Filippov as telling reporters his ministry had drawn up a plan for ensuring places of learning receive funds promised under the annual budget. It gave no figures. Primakov faces a host of problems other than the economy and is expected soon to meet Aslan Maskhadov, leader of the breakaway Chechnya region, over rising tension in the North Caucasus. In the latest incident in the volatile region, an explosion and fire on a military train killed a soldier and a fireman in Russia's southern region of Dagestan. Interior Ministry officials in Dagestan said it was not known what caused Friday's blast but Tass said it could have been a mine or some other kind of explosive device. Copyright 1998 Reuters Limited.