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To: accountclosed who wrote (16942)	1/25/1999 8:56:00 AM
From: Cynic 2005	Respond to of 86076

Re. possible China Devaluation. Once more devaluation against $ is good for the buck! -g-; Happy days are here again, futures up a buck and half. NASCRAP is up about 15 --------------- Top News Mon, 25 Jan 1999, 8:51am EST U.S. Bonds Hold Gains, Buoyed by Speculation China May Devalue Currency (Adds comment in penultimate paragraph; updates prices.) London, Jan. 25 (Bloomberg) -- U.S. bonds were little changed, holding gains from the two previous sessions, as speculation China may devalue its currency weighed on stock markets and boosted demand for Treasuries as a haven. ''There's a lot of talk about China devaluing, and with Brazil still rumbling along as well, people are playing it safe and going for bonds,'' said Tim Harris, a market strategist at National Australia Bank. The 30-year bond fell about 1/8, or $1.25 cents per $1,000 bond, to 102 3/8. Its yield was little changed at 5.09 percent. Yields on two-year notes, the most actively traded Treasuries, fell 2 basis points to 4.54 percent. Over the weekend, an article in the official China Daily Business Weekly newspaper said devaluation of the Chinese yuan ''would not definitely be a bad thing.'' The article heightened speculation China may follow Brazil's decision to let its currency float against the dollar. Stocks have fallen and bonds gained in the past two days as concern Brazil's currency weakness will spread to other nations, dragging on U.S. economic growth and crimping corporate profits. The prospect of a Chinese devaluation is adding to that concern, analysts said. The benchmark Dow Jones Industrial Average has lost 2.5 percent in the past three sessions, bringing its decline in the past two weeks to more than 5 percent. Electronic trading in the Standard & Poor's 500 Index futures contracts indicates stocks will extend those losses today. 'Flight to Quality' Hong Kong's Hang Seng index lost more than 2 percent today, leading declines in many Asian markets, and Germany's Dax index was recently down 1.5 percent. ''China is the topic du jour, (after) reports over the weekend of a possible yuan devaluation led to flight-to-quality buying,'' said George Harrington, a fixed-income analyst at Thomson Global Markets in Sydney. He said Brazil's financial crisis also remained a concern for investors. Brazil's currency, the real, has declined almost 30 percent since its mid-month devaluation. That's raised concern interest rates will be raised in an attempt to bolster the currency, further crimping economic growth. Slowing growth in Brazil, Latin America's largest economy, would likely drag on growth in the U.S., which conducts one- fifth of its trade with the region. That may prompt the Federal Reserve to lower U.S. interest rates in the months ahead, providing a further boost for bonds. Investors will get further evidence on the strength of the world's largest economy from a report on home sales, slated for release at 3 p.m. London time today. Budget Deficit Sales of existing homes probably fell 0.8 percent in December to an annual rate of 4.86 million units, following a 2.7 percent rise to an annual rate of 4.90 million, according to economists surveyed by Bloomberg News. That report will be followed at 7 p.m. by the Treasury's monthly budget statement for December. The government probably registered a deficit of $600 million last month, compared with a surplus of $13.6 billion in December 1997, analysts said. Some investors said that even if the U.S. economy doesn't slow appreciably, a slowdown in Latin America and other emerging economies would still weigh on inflation globally. Slowing inflation means bonds hold more of their value over time. ''As bond investors, (Brazil's crisis) is good news, with more pressure on the downside to inflation,'' said Mark Parry, who helps manage about $15 billion at Hill Samuel Asset Management. About $5 billion of bills, notes and bonds traded through most of the major bond brokers by midday London time, according to GovPX Inc., a bond-pricing service. That compares with 50 billion in New York Friday.