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BLOCK, 10Y Put Sale


Reverse Repo Operation, New Record High


SONIA Dove Strikes Again

     WASHINGTON (MNI) - The following are excerpts from the Federal Open 
Market Committee minutes of the December 12 - December 13 meeting, 
published Wednesday: 
     Meeting participants also discussed the recent narrowing of the gap 
between the yields on long- and shortmaturity nominal Treasury 
securities, which had resulted in a flatter profile of the term 
structure of interest rates. Among the factors contributing to the 
flattening, participants pointed to recent increases in the target range 
for the federal funds rate, reductions in investors estimates of the 
longer-run neutral real interest rate, lower longerterm inflation 
expectations, and lower term premiums. They generally agreed that the 
current degree of flatness of the yield curve was not unusual by 
historical standards. However, several participants thought that it 
would be important to continue to monitor the slope of the yield curve. 
Some expressed concern that a possible future inversion of the yield 
curve, with short-term yields rising above those on longer-term Treasury 
securities, could portend an economic slowdown, noting that inversions 
have preceded recessions over the past several decades, or that a 
protracted yield curve inversion could adversely affect the financial 
condition of banks and other financial institutions and pose risks to 
financial stability. A couple of other participants viewed the 
flattening of the yield curve as an expected consequence of increases in 
the Committees target range for the federal funds rate, and judged that 
a yield curve inversion under such circumstances would not necessarily 
foreshadow or cause an economic downturn. It was also noted that 
contacts in the financial sector generally did not express concern about 
the recent flattening of the term structure. 
     ** MNI Washington Bureau: (202)371-2121 ** 
[TOPICS: MMUFE$,M$U$$$,MT$$$$]