U.S. CREDIT MARKETS OPEN LOWER
U.S. credit markets opened lower,
undercut by a weaker dollar, dealers said.
    The impetus for the opening declines came from overseas
trading, where a lack of retail buying led to profit-taking
that erased yesterday's moderate gains, dealers said.
    Most investors have stepped to the sidelines to await the
outcome of this week's monetary meetings in Washington and to
see how it affects exchange rates, they added.
    The key 7-1/2 pct Treasury bond opened 17/32 lower at
95-22/32 to yield 7.88 pct compared with 7.84 pct at
yesterday's close. It fell to 95-26/32 in late Tokyo trade.
    "How the bond market trades seems to be a mirror image of
how the dollar/yen trades," a dealer said. "As the dollar goes,
so goes the market, but so far we're just bouncing around in
thin trading."
    Skepticism that this week's monetary meetings of leading
industrial nations in Washington will produce substantive
agreements to ease trade tensions between the U.S. and Japan
and take pressure off the dollar is weighing on bond prices.
    "I can't imagine that anything of much substance could
comoe out of these meetings other than a reiteration of
previous statements," a dealer said.
    Dealers said U.S. government securities prices will be
vulnerable as long as further dollar declines are expected.
    The 6-3/8 pct two-year notes fell 1/16 to 99-20/32 at the
opening and the 7-1/4 pct 10-years dropped 11/32 to 97-25/32.
    Treasury bill rates rose in early trading, pulled higher in
sympathy with the rise in coupon yields.
    Three-month bills were unchanged from yesterday's auction
price at 5.53 pct bid, while six-month bills rose six basis
points from their auction price to 5.69 pct bid.
    Year bills rose four basis points to 5.77 pct bid.
    The Federal funds rate opened at 6-1/8 pct and remained at
this level in early trading. It averaged 6.20 pct yesterday.
    Economists said seasonal pressures on bank reserves point
to a possible indirect injection of temporary reserves by the
Federal Reserve this morning. Some look for the Fed to purchase
coupon securities this afternoon.
    Dealers said the market may take its next cue from Federal
Reserve chairman Paul Volcker's Congressional testimony at 1000
EDT (1400 GMT) this morning.
 Reuter
