FUTURES Tender-guessing game again

Press, 18 October 1986, Page 25

FUTURES Tender-guessing game again

The Government stock tender dominated trading in the futures market this week.

When the tender details were released at noon yesterday, they gave little impetus to Government stock futures. The tender rates were slightly up on those at the last tender but were within market expectations, said Jenny Chin of Marshall Futures.

The weight average was 15.631 per cent on the 2/ 92 stock, up from 15.46 per cent last tender. Conjecture was heavy all week about the tender level, futures predicting by Thursday night a rate of 15.60 per cent to 15.65 per cent for 2/92 stock, Miss Chin said.

There was plenty of volatility as the December month traded off a high of 8430 on Monday to 8420 on Wednesday but reached a new peak of 8440 on Friday. “Long-term buyers still appear very aggressive, but this view will still have to be justified as the

market continues on a negative funding yield curve and the implication of GST still looms over inflation for the next quarter.”

Technical traders would have to look closely at fundamentals as to how far the bull run would continue.

Mr Geoff McDonnell, of Mair Astley Futures, said the tender had no surprises, but was keenly bid. “This is significant, as it indicates the two remaining tenders for 1986 should also be more aggressively bid with the resultant effect of lower yields as prices get bid up.

“This sentiment is likely to prevail as the market convinces itself that a shortage of stock will occur due to no tenders in the March quarter.

“However, the one wild card is the reassessment of the stock programme in November by Mr Douglas. Any indication that he may alter his stance and hold tenders during the March, 1986, quarter could mean interest rates firm up.

“We now recommend an aggressive accumulation of longs (buying positions) in this contract,” Mr McDonnell said.

Jar den and Company reports longer-term Government stock yields dropped further in the week ended Thursday in secondary market trading. The Jarden Government stock gross return index rose 0.5 per cent in the week to 133.5 (base June 27, 1985 100). In contrast, the Jarden Government stock price index dropped 0.8 per cent to 109.7 reflecting a substantial interest pay-out on October 15 (bond prices tend to fall as they go ex-in-terest). PCPs

PCPs, once a booming contract, but in decline recently, had a very quiet week, with December bids between 8455 and 8400 but trades only between 8400-8435. Miss Chin said: "We remain buyers technically on dips but would watch closely the fundamentals for any sudden change in market sentiment.” Mr McDonnell said the call rate had moved down, and term rates might follow. “We would favour the long side (buying positions) of the futures contract.” SUS contracts The kiwi dollar moved through a 1.75 U.S. cent trading range during the week, the 50c level being a pivot point until Friday, when this cracked, giving way to a low of 5U50.4930 before the kiwi settled near its highs again just below SUSO.SOOO. Miss Chin said selling by dealers and corporates emerged as the kiwi fell through 5000, activating stop-losses further down. “The $U50.4950 level is still critical and if broken technically SUSO.4BOO is possible near-term."

The upside of $U50.5150 had not been discounted but the market would be nervous buying unless offshore support was evident in the market.

The October futures contract had ceased trading. The November contract,

now the spot month, traded between 1.9725-2.0340, representing a profit/loss of $3075.

Mr McDonnell said that overseas the U.S. dollar continued its downward drift but that had no flow-on effect to the kiwi dollar. “The kiwi dollar has been influenced by the uncertainty surrounding the outcome of this week’s stock tender. On late Thursday it started to weaken as the market ascertained its reduction in rates for Government stock on the secondary market before the tender. “In the meantime, we see a trading range on the foreignexchange market of $U50.4950 to $U50.5050 for the kiwi and would open futures positions at either end of this range." In its weekly foreign-ex-change report, the Westpac Banking Corporation says it expects the kiwi dollar to trade within a range of $U50.4960 to $U50.5075 over the next week. Wool Most months wool futures traded in a range of 6c to 10c during the week with good volume of more than 280 lots, said Mr Guy Spooner, of Marshall Futures. The major influence on prices was the weak kiwi dollar on Friday, bottoming at $U550.4930. “On this movement traders covered short positions, by buying wool futures, pushing prices to the week's highs in the middle months of January, March, and May, 1985. “This sell-off of the kiwi dollar provided excellent selling for profit-takers and opportunities for speculators and hedgers alike to open new short (selling) positions.” The physical market this week added fuel to the futures market with the 35F2D trading at 572/574C a kilogram. Sydney On the Sydney Futures Exchange yesterday, December share price index futures rose six points to close at 1347.0, a 21-point discount to the physical market. Details of yesterday’s trading: SUS CONTRACTS Mth Open H/L Last Vol Nov 2.0035 .0340/035 .0160 69 Contracts traded: 69 Open positions at Oct 16: Oct 0, Nov 126, Dec 13, Jan 6, Mar 3, total 148 (down 577).

Contracts traded: 7. Open positions at Oct 16: Oct 107, Nov 64, Dec 600, Mar 329, Jun 128, Sep 48, Dec 45, Mar 47, Jun 10, total 1378 (same). GOVERNMENT STOCK

Open positions at Oct 16: Oct 0, Nov 293, Dec 2047, Mar 34, total 2374 (down 88). WOOL FUTURES

Contracts traded: 88. Open positions at Oct 16: Oct 29, Dec 214, Jan 324, Mar 512, May 463, Aug 241, Oct 204, Dec 122, Jan 177, Mar 101, total 2387 (down 3). WHEAT FUTURES Mth Open H/L Last Vol Contracts traded: nil. Open positions at Oct 16: Feb 15, Mar 27, May 19, total 61 (same).

COMMERCIAL BILLS Mth Open H/L Last Vol Dec 8400 400/400 400 1 Mar 8450 450/450 450 1 Jun 8450 450/450 450 1 Sep 8405 405/405 405 1 Dec 8400 400/400 400 1 Mar 8405 405/405 405 1 Jun 8410 410/410 410 1

Mth Open H/L Last Vol Nov 8430 435/428 432 20 Dec 8440 440/430 435 546 Mar 8435 435/435 435 1 Contracts traded: 567.

Mth Open H/L Last Vol Oct 579 579/579 579 4 Dec 560 560/558 558 5 Jan 553 556/553 553 8 Mar 553 555/552 552 26 May 559 560/557 557 17 Oct 568 568/568 568 5 Dec 572 572/571 571 4 Jan 573 573/570 570 5 Mar 573 573/572 572 14

N.Z. FUTURES MARKET WEEK ENDED OCTOBER 17 Trading Traded prices Total Open months This week To date this cont's SUS High Low Last High Low week Oct ’86 2.0000 1.9620 1.9840 2.17901.9575 48 — Nov '86 2.0340 1.9725 2.0160 2.12401.9720 161 126 Dec ’86 2.0150 1.9985 2.0135 2.01501.9316 11 13 Jan ’87 2.0252 2.0250 2.0250 2.1451 1.9000 6 6 Mar ’87 — — — 2.0800 2.0800 —— 3 Totals 226 148 PCP Oct ’86 8410 8325 8327 8485 8293 122 107 Nov ’86 — — —— 8480 8360 — 64 Dec ’86 8435 8400 8400 8545 8000 3 600 Mar ’87 8450 8450 8450 8500 8050 3 329 Jun ’87 8450 8450 8450 8520 8330 1 128 Sep ’87 8405 8405 8405 8500 8371 1 48 Dec ’87 8400 8400 8400 8565 8375 1 45 Mar ’88 8405 8405 8405 8500 8375 1 47 Jun '88 8410 8410 8410 8450 8410 1 10 Totals 133 1378 GOVERNMENT STOCK Oct ’86 8432 8420 8420 8436 8395 211 — Nov ’86 8436 8420 8432 8436 8357 105 293 Dec '86 8440 8420 8435 8490 8397 1849 2047 Mar ’87 8437 8435 8435 8455 8400 21 34 Totals 2186 2374 WOOL Oct ’86 579 578 579 584 474 5 29 Dec ’86 564 558 558 568 475 28 214 Jan ’87 556 549 553 570 474 18 324 Mar ’87 555 545 552 570 480 71 512 May ’87 560 549 557 575 486 45 463 Aug ’87 569 562 568 582 532 21 241 Oct ’87 570 564 568 582 530 34 204 Dec ’87 575 568 571 587 541 10 122 Jan ’88 573 568 570 586 541 16 177 Mar ’88 575 569 572 588 551 34 101 Totals 282 2387 Tenderable stock: 43 bales. 35F2D quotes - - 574, Christchurch, October 17 WHEAT Feb ’87 — — — 2290 2060 — 15 Mar ’87 2125 2125 2125 2330 2050 2 27 May ’87 2120 2120 2120 2350 2060 1 19 Totals 3 61