OT - NEW YORK FED SAYS NO COMMENT ON MARKET RUMOR OF EMERGENCY FED

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

*NEW YORK FED SAYS NO COMMENT ON MARKET RUMOR OF EMERGENCY FED MEETING

NEW YORK, Feb 3 (Reuters) - The Federal Reserve Bank of New York declined to comment on Thursday on widespread rumors in the bond market that the Fed was convening an emerging meeting with bond dealers to discuss inversion of the Treasury yield curve and difficulties that may be causing in the marketplace.

"No comment," said a Federal Reserve Bank of New York spokesman when contacted about the rumors.

The Federal Reserve Board is holding a regularly scheduled open meeting to discuss implementing the financial provisions of the recently passed U.S. banking legislation. That meeting began at 11:30 a.m. (1630 GMT) in Washington, D.C.

Market sources said there was speculation the central bank was convening a special meeting with dealers to discuss the inversion of the yield curve. A primary dealer contacted by Reuters said rumors of an emergency meeting were a factor in price movements in goverment debt in morning New York trade.

The 30-year bond rose over three points on Thursday amid frantic buying of the heels of an announcement by the Treasury that it would drastically cut issuance of longer-maturity debt.

========================================= End

This ought to be a MAJOR concern to these Hucksters.

Ray

-- Ray (ray@totacc.com), February 03, 2000

Answers

Ray - Do you have a link to this interesting story?

-- Teague Harper (tharper@cyberhighway.net), February 03, 2000.

Teague, this Reuters story came of of their "Reuters MoneyNet" site.

Here is the link:

Reuters MoneyNet

You must scroll down a couple of pages to get the stories, nfortunately they do not stick around long and there is no direct link.

Ray

-- Ray (ray@totacc.com), February 03, 2000.


Here is a story that followed right on the heals of the previous one:

===============================================

NEW YORK FED-MEETING WITH MARKET PLAYERS AT NY FED IS COMPLETELY UNFOUNDED"

NEW YORK, Feb 3 (Reuters) - The Federal Reserve Bank of New York said on Thursday that rumors circulating in the market about a special emergency meeting with dealers was "completely unfounded."

"I will confirm that rumors of a meeting of market participants at the New York Fed are completely unfounded," said a New York Fed spokesman.

The statement came as the Treasury market was in turmoil with long-term maturity prices skyrocketing and short-term bill rates plunging. Dealers said rumors were causing a "flight-to-quality" into bonds.

Earlier, the Fed said it had no comment on the rumors.

============================================= End

Ray

-- Ray (ray@totacc.com), February 03, 2000.


Here is another related story from MSN:

Treasuries Skyrocket, Market in Turmoil

Ray

-- Ray (ray@totacc.com), February 03, 2000.


And now it's been officially denied, so it must be true!

-- Nigel (nra@maxwell.ph.kcl.ac.uk), February 03, 2000.


http://moneycentral.msn.com/investor/news/breakingarticle.asp?ArticleI D=OBR,2000/02/03,2875

Link

Treasuries Skyrocket, Market in Turmoil February 3, 2000 01:31 PM Eastern Time

Breaking News Headlines By Daniel Sternoff

NEW YORK (Reuters) - U.S. Treasury prices skyrocketed in wild, extremely illiquid trading on Thursday as rumors swirled about financial institutions in trouble and market players sought to cover short positions in longer-dated paper.

The market was roiled as financial institutions sought to bail out of trades that were bleeding money over the past week after the yield on the 10-year note offered a better return than the 30-year bond, traders said.

``Honestly, I'm confused. What am I looking for? I'm going to try to still be employed tomorrow,'' said a trader at a U.S. bank.

The 30-year Treasury bond (US30YT-RR) surged nearly three points higher, 10-year notes (US10YT-RR) were up nearly 1-1/2 points and five-year notes (US5YT-RR) bounded more than a full point higher.

Short-term bill rates, meanwhile plunged sharply lower.

Several players cited rumors that the Federal Reserve was arranging an emergency meeting with bond dealers to address the recent wild volatility and the unusual yield picture. A spokesman for the New York Fed said the rumors were ``completely unfounded'' after initially declining to comment on them.

``Rumors of financial institutions in trouble are causing the flight to quality,'' said Mark Mahoney, chief Treasury market strategist at Warburg Dillon Read LLC.

``There are rumors going around about a hedge fund in trouble, dealers in trouble. There is a little bit of concern about liquidity and accounts blowing up so you've got a little bit of flight to quality here,'' said a trader at a U.S. primary dealer.

``People are looking for substantiation (of rumors) and they haven't been able to get it. Until it's denied, they are going to believe that it is true,'' the dealer said.

Prices receded a touch from their highs, and near 1:00 p.m. (1800 GMT), the 30-year T-bond was up 2-14/32 at 100-9/32, yielding 6.1 percent.

10-year notes were up 1-6/32 at 97-5/32 yielding 6.40 percent and five-years were up 26/32 at 97-20/32 yielding 6.47 percent.

The sharp and sudden climb in prices came on top of strong gains earlier as the market was shaken by continued aftershocks from the Treasury Department's announcement on Wednesday of its plans to cut the supply of longer-term government debt.

The Treasury, flush with surplus budget funds, said it plans to buy back some $30 billion of older, higher yielding debt this year.

The announcement Wednesday, which indicated buybacks and a worsening supply squeeze in long-dated issues, sent prices on long-term bonds soaring and their yields down sharply.

The sharp moves have catapulted yields on short-term debt above longer maturity issues, an irregular phenomenon known as yield curve inversion which has traders scrambling to readjust positions and portfolios.

Bonds normally yield more than shorter-term paper, compensating investors for the longer-term risk that bond yields might fall behind inflation.

Detailing its buyback plan on Wednesday, the Treasury said repurchases would start within two months in initial chunks of around $1.0 billion. It also said it would reduce some debt issuance and would hold a bond auction only in February.

The plan has helped send long-term interest rates into a downward spiral even as the Federal Reserve is jacking short-term rates higher to ward off inflationary pressures in the booming U.S. economy.

The Fed on Wednesday raised two key interest rates by 25 basis points, in line with Wall Street's expectations, and the Treasury market barely flinched.

Deputy Treasury Secretary Stuart Eizenstat on Thursday shrugged off criticism that the buyback plan had been mistimed, saying debt reduction in times of surplus was positive and would result in lower long-term interest rates.

Many market players expect the Fed to continue to modestly ratchet up interest rates in the months ahead.

Traders are looking to a key U.S. employment report on Friday for any fresh signs of price pressures, but some say supply distortions are reducing the impact of economic data.

Three-month bill rates fell nine basis points to 5.41 percent, six- month bill rates dropped 14 basis points to 5.52 percent, and year bill rates fell 13 basis points to 5.70 percent. A basis point is 1/100 of a percentage point.

-- (M@rket.trends), February 03, 2000.


I wonder how many people realize that the Bond Market is just as important, if not MORE important, than the Stock Market. So many people just look at the DOW and NASDAQ components each day and if they are in positive territory people think everything is FINE. They should be looking harder at the advance/decline line, P/E ratios and a host of other indicators before they pass a superficial judgment on the economy.

-- Teague Harper (tharper@cyberhighway.net), February 03, 2000.

``Honestly, I'm confused. What am I looking for? I'm going to try to still be employed tomorrow,'' said a trader at a U.S. bank.

That's so funny for a sophisticated, highly paid professional to be confused. I'm thoroughly confused about the entire financial market to wit: Amazon deepens its quarterly loss to $.55 a share and the stock skyrockets because its promises profitability somewhere down the road. Everytime we have an interest rate hike its time to celebrate and buy some more. Yes, I'm confused, very confused and glad I have company.

Since higher interest rates won't pop the bubble, higher petroleum product prices haven't had time to trickle down to the statistics yet, I think the bubble popper is going to have to come from some other, as yet unknown, direction. Who knows, maybe Japan will be the cause.

It just takes the optimists a little longer to notice that the dam has got a hole in it.

-- Guy Daley (guydaley@bwn.net), February 03, 2000.


There was a moment of gallows humor this morning on bubblevision, errr, CNBC. Mark Haines was talking with Rick Santelli about the bond situation and how really nasty it was getting for some traders. Joe Kernan chimed in with "So, what floor are you on?" Santelli answered that he was on the 4th floor, then got a funny smile on his face and added, "Oh yeah, I get it. Well, from this height, you might bounce a little, so they'd probably have to head for the roof."

Perilous times, indeed...

-- DeeEmBee (macbeth1@pacbell.net), February 03, 2000.


Moderation questions? read the FAQ