VOLATILITY LIKELY TO REMAIN LOW IN DEBT FUTURES
Financial analysts see little chance
that U.S. interest rate futures will break out of their narrow
ranges and low volatility during the remainder of the week.
    "We got a little volatility Wednesday," said Staley
Commodities International analyst Jerome Lacey. "But for the
moment we're still in a trading range."
    Even unexpected developments concerning the growth of the
U.S. economy may not be enough to spur the market out of its
sluggish state, the analysts said.
    "It (the bond market) has not yet demonstrated that it can
break out of its very low volatility," said Carroll McEntee and
McGinley analyst Denis Karnosky. "It needs something, but it's
not going to be news about the economy," he said.
    Karnosky said that the bond market will possibly break out
of the doldrums if participants perceive that the dollar has
stabilized and the Federal Reserve has more room to conduct
monetary policy.
    But even Wednesday, when fed funds were below six pct, the
dollar strong and oil on the soft side, bond futures attracted
eager sellers when contracts approached recent highs, he said.
    In addition to a changing perception about the dollar and
monetary policy, Golden Gate Futures president Norman Quinn
said the beginning of April could bring foreign investors back
into the marketplace.
    "The market is beginning to feel there may be demand at the
beginning of the fiscal year in Japan on April 1," Quinn said.
    Quinn echoed the sentiment of many analysts that there are
large amounts of cash waiting to be invested. If Japanese
investment in U.S. securities does materialize at the start of
Japan's fiscal year, domestic funds may also flow into the bond
market, he said.
    "We could get a stiff rally, possibly enough to bring
yields on long bonds down to seven to 7-1/8 pct," compared to
the current yield of about 7.5 pct, Quinn said.
    In the meantime, even the prospect of new supply is not
likely to move futures.
    The Treasury's announcement of a 15 billion dlr refunding
operation did little to move cash government securities prices
late Wednesday after the close of futures.
    "I'd be surprised if supply pushed us out of it (the
trading range)," Lacey said.
 Reuter
