EFFECTIVE 5:00 PM EASTERN TIME: 11/24/97 /_________________\
KEY INDICATOR CURRENT CHANGE FROM LAST YIELD |6-Mth CD :5.80% *|
--------------- --------- ---------------- ------ |11th COFI:4.941% |
3-month T-Bill: 5.13 - up 3 basis pnts-5.27% |6Mo-LIBOR:5.805% |
10 Year T-Note: 102 03/32 - down 6/32 -5.84% |1Yr TBill:5.44% *|
Long Bond.....: 100 25/32 - down 16/32 -6.07% |3Yr TBill:5.76% *|
Dow Jones.....: 7767.92 - down 113.15 |5Yr TBill:5.81% *|
FHLMC 60 day..: 7.37% - up from 7.33% (11/21) |10YrTBill:5.88% *|
FNMA 60 day...: 7.30% - down from 7.31% (11/21) |30YrTBond:6.12% *|
|PRIME - 8.500%|
Todays Interest Rate/Loan Fee Pricing Trend: |DISCOUNT - 5.000%|
*** DOWN/STABLE *** |FED FUNDS- 5.50 |
===================== |_________________|
* Wkly Average ending 11/14
Also this afternoon, The Treasury budget deficit came in smaller than expected in October at $35.6 bln, down from $39.8 bln in October 1996 despite the fact that about $8 bln in November payments were pushed into October this year. There was no market reaction to this report.
FYI: Much of the talk today surrounds events in Japan, and how the BOJ will deal with the Yamaichi closing. There have been reports that the BOJ has requested help from the Fed in funding any liquidity needs of Japanese banks (which are paying a premium in the funds market). The Fed has refused comment on these reports. Traders are also pondering the liquidation of Yamaichi's assets, though such asset sales are usually strung out over relatively long periods so as to minimize the market impact (and get the best price for the assets).
10:45AM EST: Both Bonds and Stocks are down in early trading after the closing of Yamaichi Securities is confirmed. Yamaichi is the fourth biggest brokerage in Japan, (more on this below). [Japanese markets closed for holiday; Hong Kong's Hang Seng Index up 0.4%, Korean Kospi -7.2%]. This afternoon's release of the October Treasury budget is the only economic report scheduled for release today, and should have no impact.
Also later this afternoon, The Treasury Department will hold the first leg of its monthly auctions, selling $15 billion of 2-Year Notes. $11 billion of 5-Year Notes will be auctioned tomorrow.
The Yamaichi closure will undoubtedly prompt some Treasury sales as their assets are liquidated, but it should be noted that such selling will not necessarily be a significant long-term market factor. Word of the closing boosted Treasuries on Friday via flight-to-quality flows, but some nervousness set in overnight as the market continues to fear Japanese selling of Treasuries.
This week's holiday shortened economic calendar is fairly light with Wednesday's reports on Durable Goods Orders and revised 3rd quarter Gross Domestic Product (GDP) having the most significance. Traders will also scrutinize the Friday release of the Chicago Purchasing managers report as it may reveal what the National Association of Purchasing Managers (NAPM) may look like on the following Monday. (see the calendar for details).
Treasurys ended higher Friday, buoyed by the purchase of notes and bonds by the Federal Reserve and reports that one of Japan's "big four" securities houses, Yamaichi Securities, had asked Japan's Ministry of Finance to allow it to cease operations. In late trading, the price of the benchmark 30-year Treasury bond was up 10/32, lowering its yield to 6.034% from 6.057% late Thursday.
Bonds opened lower on overnight gains in Asian share prices and on higher European bourses. Then profit-taking drove them lower for the next two hours.
The market was lifted by a Federal Reserve purchase early Friday of $1.439 billion of Treasurys with maturities ranging from five to 30 years. Such purchases don't have policy implications, but are done to add reserves to the banking system.
But the real catapult for bond prices was the rumors that Yamaichi Securities is closing up shop thanks to a mountain of debt. The news seemed to crystallize all the negative thinking about Japan that has been floating around in recent weeks. It certainly drove dollar-yen higher and stocks lower; it also sent the bond gain to double-tick territory. And that is where it ended.
There were no data releases and no speakers during the session....