EFFECTIVE 5:00 PM EASTERN TIME: 11/25/97 /_________________\
KEY INDICATOR CURRENT CHANGE FROM LAST YIELD |6-Mth CD :5.82% *|
--------------- --------- ---------------- ------ |11th COFI:4.941% |
3-month T-Bill: 5.14 - up 2 basis pnts-5.28% |6Mo-LIBOR:5.805% |
10 Year T-Note: 102 03/32 - unchanged -5.84% |1Yr TBill:5.46% *|
Long Bond.....: 101 01/32 - up 7/32 -6.05% |3Yr TBill:5.73% *|
Dow Jones.....: 7808.95 - up 41.03 |5Yr TBill:5.79% *|
FHLMC 60 day..: 7.35% - down from 7.37% (11/24) |10YrTBill:5.84% *|
FNMA 60 day...: 7.30% - from 7.30% (11/24) |30YrTBond:6.05% *|
|PRIME - 8.500%|
Todays Interest Rate/Loan Fee Pricing Trend: |DISCOUNT - 5.000%|
*** STABLE *** |FED FUNDS- 5.50 |
================ |_________________|
* Wkly Average ending 11/21
There are many questions following news on Friday of the failure of Japan's Yamaichi Securities, one of the "big four" among Japanese financial houses. Will Japan dump lots of its Treasuries? Can all things Asia get any worse? Do domestic economic releases matter? These questions have certain answers (no, yes, no), but players continue to think and rethink them from new angles. (more on this below)
Bonds opened lower, but have been climbling back through-out the morning, while stocks opened higher but quickly gave back those gains. This morning's stronger than expected economic reports on Consumer Confidence and Existing Home Sales had little impact on the markets.
Later this afternoon, the Treasury will hold the second leg of its monthly auctions, selling $11 billion in 5-Year Notes. Yesterday's 2-Year Note auction came in near expectations. Also later today, the Johnson Redbook on weekly retail sales will be released. In a morning release similar to the Redbook report, the Mitsubishi sales index turned in a flat reading for the November 22 week following three straight increases.
The Conference Board reported this morning that its Consumer Confidence Index shot up to 128.3 in November from 123.4 in October - the market had forecast 123.0. Americans shrugged off turbulence in global financial markets and instead focused on the healthy U.S. economy. The report comes at a time of uncertainty in the global economy. The financial troubles sweeping through Asia, leaving currency and stock markets battered, have added an element of nervousness to the markets.
Also reported this morning, the University of Michigan said that its Consumer Sentiment Index rose to 107.2 for the final November figure of 106.1. This better than expected reading confirms that consumers were undaunted by the recent stock market volatility.
Lastly reported this morning, the National Association of Realtors (NAR) said that Existing Home Sales rose 2.1% in October to total a seasonall adjusted 4.40 million units - the strongest pace recorded since NAR began tracking home sales in 1968 - the market had forecast 4.30 million. Last month's pace was 10.0% above the 4.0-million unit rate recorded in October 1996.
Regionaly, sales were up 6.5% in the West; up 6.6% in the Midwest; unchanged in the South; and down 4.5% in the Northeast.
Treasury prices fell yesterday on fears that troubled Japanese financial institutions could soon sell U.S. Treasury securities to raise funds to keep themselves afloat. Still, most traders attributed the losses, which came in quiet trading, to profit-taking by investors eager to lock in recent sharp gains. In late trading, the bellwether 30-year bond was down 12/32, raising its yield to 6.06% from 6.03%.
News on Friday of the failure of Japan's Yamaichi Securities, one of the "big four" among Japanese financial houses, gave some investors reason to worry, and others reason to take profits.
Despite a loss of 113.16 in the Dow Jones Industrial Average, so-called flight-to-quality traders were infrequent.
The biggest worry is that the Yamaichi closure could trigger a wider financial collapse in Japan, prompting banks there to sell their huge holdings of U.S. Treasury bonds to meet debts. Its failure was Japan's largest financial debacle ever and the third financial institution to close this month.
Others fear that the Japanese central bank could turn to selling Treasurys as a means of halting the runaway appreciation of the U.S. dollar.
Meanwhile, the Treasury's auction of $15 billion of 2-Year Notes was reasonably successful. The notes were awarded at a yield of 5.70%, in line with expectations. The bid-to-cover ratio was 2.66, above the 2.36 average of the past 12 auctions....