TRADING RANGE LIKELY TO CONTINUE IN DEBT FUTURES
U.S. economic data due out next week is
unlikely to hold any surprises that will shake U.S. interest
rate futures out of their relatively narrow trading range of
the last 3-1/2 months, financial analysts said.
    "People don't seem to have any firm conviction about the
current strength of the economy or about the Federal Reserve
doing anything," said Drexel Burnham Lambert analyst Norman
Mains.
    The narrow range trading is also taking its toll on trading
volume, he noted. "We've had a decline in activity as recent
economic statistics have not greatly changed people's
viewpoints on interest rates," Mains said.
    The data, which has provided not clear-cut view of the
economy, coupled with dampened activity in the foreign exchange
markets after the Paris initiative has made for "less than
ebullient market action," Mains said.
    He added, however, that Treasury bond futures could be in
for a retracement after the recent rise as they are near the
top of the trading range.
    "My view is that the economy remains relatively strong and
market participants will see that current prices are
unjustified," Mains said.
    Refco Inc senior vice president Michael Connery also noted
that the market is showing very little momentum and lacks
retail interest. "All of the movement occurs at the opening,"
afterwhich volume dwindles and momentum fades, Connery said.
    Although data during the week was mildly positive for bond
prices, the small rise in February producer prices and downward
revisions in January retail sales and industrial production
were "not real exciting," said Prudential Bache analyst Fred
Leiner.
    "There is no one factor that will push us through the highs
at this moment," Leiner said.
    Next week's revision to fourth quarter U.S. Gross national
Product is also likely to be of little interest to the market,
said Kleinwort Benson chief financial economist Sam Kahan.
Still, forecasts for first quarter GNP could play a role in the
direction of bond prices over the next month.
    Kahan said his early estimate for first quarter growth is
around three pct, due largely to a buildup in inventories
reflected in the January inventory data Friday, which showed
the largest increase since 1979.
    "The key question will be not whether there is a large
increase in first quarter GNP, but whether any increase is
sustainable or a one shot deal," Kahan said.
    He said that a sizable increase in first quarter GNP
stemming from an increase in inventories will be a drag on
second quarter growth.
    If that is the case, GNP in the second quarter could ease
back to a one to two pct growth rate, Kahan said.
 Reuter
