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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (933)	10/26/1998 9:43:00 AM
From: Paul Berliner	Read Replies (1) \| Respond to of 3536

Italian rates have not fallen as portugese and spanish rates have over the last 6 months (as most predicted was a given due to the approaching launching of the Euro). Thus, because italian spreads are not narrowing vs. german rates, the bundesbank can't ease. Growth in deustchland is expected to be around 2.5% in 1999, which could easily be boosted by a nice rate cut. However, Italy is the current fly in the ointment. To make matters worse, funds like LTCM bet heavily that the other Euro 1st round countries rates would come down to german levels. They have all sustained heavy losses because of Italy's divergence from the expected outcome.