Today on CNNfn: Betting on Y2K - Futures traders are speculating that a money crunch will send rates soaringgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Found this on CNNfn's Y2k Countdown today:
NEW YORK (CNNfn) - In Chicago's futures pits they've dubbed the Y2K bug "the Millennium Butterfly." Traders are buying and selling futures contracts on short-term interest rates, betting that Y2K fears will send people scrambling for cash on the eve of the Millennium.
In the low-tech open-outcry trading pits of Chicago, traders are betting the Y2K fixes may be too little, too late.
Their bet: that the bug will bring the financial system to its knees as 1999 draws to a close.
Jim Bianco of the research firm that bears his name, commented, "If 100 million households go running to their ATM machines in the last half of December to take out some money to buy groceries just in case of a glitch, it will cause a problem in the money markets."
If Bianco is right, banks will be scrambling in the overnight money markets to make sure they have enough cash on hand to cover the withdrawals. That, in turn, could send short-term interest rates soaring, perhaps only for a few days, but the impact could be profound.
Already, some futures contracts traded at the Chicago Mercantile Exchange have fallen as traders bet on an expected spike in interest rates.
Peter Yastrow, vice president of eurodollar futures at Cantor Fitzgerald, commented, "Maybe the chances are very small, but they're real and people are scared of it."
Individuals wouldn't be the only ones hoarding funds for a possible Y2K rainy day.
Paul Kasriel, economist at Northern Trust, said, "We could see corporations building up their inventories toward the end of 1999 for fear they won't be able to get goods in. They'll borrow to do that, and that will put upward pressure on interest rates as well."
The Federal Reserve says the banking system will be ready for any Y2K liquidity crunch.
James Annable, an economist for Bank One, insists the banking system will be ready for any Y2K liquidity crunch. "It really is a question of how well the public responds to this," he said. "If everybody wants to convert their deposits into cash, there's going to be a big demand for cash during that period. It's unnecessary."
Still, the Fed plans to have an extra $50 billion on hand, just in case.
-- Tim (firstname.lastname@example.org), February 22, 1999
CNNfn also has a Y2k countdown page at http://www.cnnfn.com/s pecials/countdown/. If this has already been posted, my apologies :-)
-- Faze the Nation (email@example.com), February 22, 1999.
Sort of reminds me of the dudes who played poker on the Titanic, heh heh. As if investing in futures isn't risky enough...sheesh!
-- Bettor (firstname.lastname@example.org), February 22, 1999.
Personally, I don't see rates will go up. The Fed fixes the rates at which they lend money to banks, they won't want to worsen the situation by increasing those rates.
-- (email@example.com), February 22, 1999.