1999-12-21 Rates unchanged

Daily Brady Bond Trading Commentary

Tuesday December 21, 1999 

The FOMC decided to leave rates unchanged Tuesday and kept a neutral policy stance.

Fed comments indicate, however, that the decisions were largely based on Y2K concerns and that there may be reason to assume a tightening stance early next year, particularly as demand continues to grow.

Economists have been raising their year-2000 growth forecasts, commodity prices remain strong, and financial asset prices will do anything but discourage the Fed from taking at least precautionary measures against inflation.

Standard & Poor's downgraded Venezuela's foreign currency debt rating one notch to "B", and shifted its outlook to negative. The downgrade reflects the agency's outlook on Venezuelan politics, as S&P officials cited the detrimental effects the new constitution is likely to have on structural and fiscal reforms.

Contributed by

Credit Lyonnais Securities (USA) Inc.

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