Wednesday, April 30, 2008
6:03 pm : Bursa Malaysia is closed tomorrow for Labour Day - 1 May 2008
Market opens on May 2, 2008 Friday.
5:45 pm - Rate Cut - Possible 25 basis point to 2 percent ???
Bernanke May Have to Do More to Ease Jump in Bank Funding Costs
By Scott Lanman
April 30 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may need to step up his effort to unfreeze bank funding markets as a surge in borrowing costs blunts the impact of the cash auctions the central bank introduced in December.
The cost of obtaining funds for three months has risen by 0.33 percentage point since the Federal Open Market Committee's last meeting on March 18. The jump may force homeowners with variable-rate mortgages and some companies to pay more on their loans at a time when economic growth is faltering.
Policy makers may discuss the results of the $100 billion-a- month Term Auction Facility when they gather for the second day of their two-day meeting in Washington to set interest rates. The central bank will probably increase the size and duration of its biweekly auctions, according to economists at Barclays Capital Inc. and other firms.
``There's clearly a need for the Fed to do more,'' said Charles Lieberman, a former New York Fed economist who's now chief investment officer of Advisors Capital Management LLC in Paramus, New Jersey. ``The underlying problem'' is that banks and other investors are ``still nervous'' about lending to each other, he said.
The FOMC may also lower its benchmark rate by a quarter point, to 2 percent, as officials attempt to spur economic growth. Traders anticipate the central bank will then take a breather from its series of rate cuts, futures prices show. Today's statement is scheduled for around 2:15 p.m.
Liquidity Efforts
Investors' focus may instead shift to the Fed's attempt to stem the surge in bank funding costs that began in August, when the subprime-mortgage market's collapse spurred concern about losses at financial firms.
The three-month London Interbank Offered Rate for dollars has climbed to 2.87 percent from 2.54 percent on March 18.
Increases in Libor and other rates are ``a pretty clear indication that liquidity remains an issue or that term liquidity remains scarce,'' said Dean Maki, chief U.S. economist at Barclays in New York and a former Fed researcher. ``The Fed's made pretty clear they're going to continue to attack those problems as needed.''
The TAF is one of several Fed initiatives to unblock credit markets, along with direct loans to investment banks and $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. Investors have responded, buying a record $45.3 billion of corporate bonds last week and spurring an 11 percent rally in the Standard & Poor's 500 stock index from the year's low last month.
Aimed at Banks
The Fed auctions 28-day loans through the TAF, helping banks borrow funds that they might not obtain from counterparts. The Fed created the tool because of rising rates on one- to three- month loans among banks, Fed Governor Frederic Mishkin said in a February speech. The auctions may have had ``significant beneficial effects on financial markets,'' he said at the time.
Another gauge of bank funding costs, the premium on Libor over the overnight indexed swap rate, a measure of what traders expect for the Fed's benchmark rate, reached 87 basis points on April 21. That was the highest since the Fed announced the TAF on Dec. 12.
Bigger TAF operations would probably slow or reverse the increase in borrowing costs, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Originally $40 billion a month, the Fed raised the amount of the auctions to $60 billion in January and to $100 billion in March.
`Substantial' Increase
``Any substantial further increase would start moving the program to a level where'' it is more than ``just psychologically relevant,'' Crandall said.
Fed spokesman David Skidmore declined to comment on the central bank's plans.
In concert with its liquidity efforts, the Fed has lowered its target rate for overnight loans between banks by 3 percentage points since September. Officials this month signaled they may be nearing a pause in reductions, anticipating some recovery in growth later in the year and sensing a renewed danger of inflation.
Fed Governor Kevin Warsh, San Francisco Fed President Janet Yellen and three other district-bank presidents voiced concerns about rising prices this month.
``Federal Reserve officials view themselves as about done with policy easing,'' said Vincent Reinhart, who was the Fed's chief monetary-policy strategist from 2001 until September 2007. ``They probably want to signal that the easing cycle is over, at least for a while.''
Weakest Since 2001
The Commerce Department is forecast to report today that economic growth slowed to a 0.5 percent pace in the first quarter after a 0.6 percent expansion the previous three months, according to the median forecast in a Bloomberg News survey. That would be the weakest six-month performance since the U.S. was last in recession in 2001.
At the same time, inflation is picking up. The personal consumption expenditures price index climbed 3.4 percent in February from a year before, the fourth straight month in excess of 3 percent.
While the Fed's benchmark rate is lower, the increase in Libor is ``constraining'' banks' ability to lend, said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
By Scott Lanman
April 30 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may need to step up his effort to unfreeze bank funding markets as a surge in borrowing costs blunts the impact of the cash auctions the central bank introduced in December.
The cost of obtaining funds for three months has risen by 0.33 percentage point since the Federal Open Market Committee's last meeting on March 18. The jump may force homeowners with variable-rate mortgages and some companies to pay more on their loans at a time when economic growth is faltering.
Policy makers may discuss the results of the $100 billion-a- month Term Auction Facility when they gather for the second day of their two-day meeting in Washington to set interest rates. The central bank will probably increase the size and duration of its biweekly auctions, according to economists at Barclays Capital Inc. and other firms.
``There's clearly a need for the Fed to do more,'' said Charles Lieberman, a former New York Fed economist who's now chief investment officer of Advisors Capital Management LLC in Paramus, New Jersey. ``The underlying problem'' is that banks and other investors are ``still nervous'' about lending to each other, he said.
The FOMC may also lower its benchmark rate by a quarter point, to 2 percent, as officials attempt to spur economic growth. Traders anticipate the central bank will then take a breather from its series of rate cuts, futures prices show. Today's statement is scheduled for around 2:15 p.m.
Liquidity Efforts
Investors' focus may instead shift to the Fed's attempt to stem the surge in bank funding costs that began in August, when the subprime-mortgage market's collapse spurred concern about losses at financial firms.
The three-month London Interbank Offered Rate for dollars has climbed to 2.87 percent from 2.54 percent on March 18.
Increases in Libor and other rates are ``a pretty clear indication that liquidity remains an issue or that term liquidity remains scarce,'' said Dean Maki, chief U.S. economist at Barclays in New York and a former Fed researcher. ``The Fed's made pretty clear they're going to continue to attack those problems as needed.''
The TAF is one of several Fed initiatives to unblock credit markets, along with direct loans to investment banks and $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. Investors have responded, buying a record $45.3 billion of corporate bonds last week and spurring an 11 percent rally in the Standard & Poor's 500 stock index from the year's low last month.
Aimed at Banks
The Fed auctions 28-day loans through the TAF, helping banks borrow funds that they might not obtain from counterparts. The Fed created the tool because of rising rates on one- to three- month loans among banks, Fed Governor Frederic Mishkin said in a February speech. The auctions may have had ``significant beneficial effects on financial markets,'' he said at the time.
Another gauge of bank funding costs, the premium on Libor over the overnight indexed swap rate, a measure of what traders expect for the Fed's benchmark rate, reached 87 basis points on April 21. That was the highest since the Fed announced the TAF on Dec. 12.
Bigger TAF operations would probably slow or reverse the increase in borrowing costs, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Originally $40 billion a month, the Fed raised the amount of the auctions to $60 billion in January and to $100 billion in March.
`Substantial' Increase
``Any substantial further increase would start moving the program to a level where'' it is more than ``just psychologically relevant,'' Crandall said.
Fed spokesman David Skidmore declined to comment on the central bank's plans.
In concert with its liquidity efforts, the Fed has lowered its target rate for overnight loans between banks by 3 percentage points since September. Officials this month signaled they may be nearing a pause in reductions, anticipating some recovery in growth later in the year and sensing a renewed danger of inflation.
Fed Governor Kevin Warsh, San Francisco Fed President Janet Yellen and three other district-bank presidents voiced concerns about rising prices this month.
``Federal Reserve officials view themselves as about done with policy easing,'' said Vincent Reinhart, who was the Fed's chief monetary-policy strategist from 2001 until September 2007. ``They probably want to signal that the easing cycle is over, at least for a while.''
Weakest Since 2001
The Commerce Department is forecast to report today that economic growth slowed to a 0.5 percent pace in the first quarter after a 0.6 percent expansion the previous three months, according to the median forecast in a Bloomberg News survey. That would be the weakest six-month performance since the U.S. was last in recession in 2001.
At the same time, inflation is picking up. The personal consumption expenditures price index climbed 3.4 percent in February from a year before, the fourth straight month in excess of 3 percent.
While the Fed's benchmark rate is lower, the increase in Libor is ``constraining'' banks' ability to lend, said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
5:19 pm - FKLI closed at 1283.0 for April contract.
It is hard to tell but the sign look bearish from this point onwards or sideway market. The US FOMC will announce if the interest rate cut is happening or not.
2:32 pm - FKLI is very stubborn, it just wud not go down !
The sellers are exhausted now ! Let's see if the buyers can take over in the afternoon.11:41 am - KLCI is breaking below 1277.
If it cannot stay above 1277.0, KLCI is following a downtrend path.
10:58 am - FKLI is moving sideway and forming a saucer shape.
This is a sign of bullish in the short term !10:16 am - DJIA set to look toppish today !
If DJIA cannot break higher tonite, we wud see some selling at DJIA tonite. Also 1 May is a public holiday for M'sia. However, DJIA is a holiday.
9:55 am - FKLI set to break down lower today.
Look at the FKLI-May contract, looking to break 1274.0. Maybe for the 3rd attempt, it will break.
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