GERMAN WAGE ROUND SAID TO LIMIT MONETARY OPTIONS
  The Bundesbank's options for West
  Germany monetary policy are limited for the foreseeable future
  by the delicate stage of wage negotiations between unions and
  employers, economists and money market dealers said.
      Call money fell in quite active trading today, dropping to
  3.40/50 pct from 3.55/65 pct yesterday, and below the 3.50 pct
  treasury bill rate as a difficult month-end approached.
      But dealers and economists said the Bundesbank was unlikely
  to encourage lower rates in the foreseeable future largely for
  fear of upsetting the current wage round.
      One money market dealer for a major foreign bank said, "I
  don't think the Bundesbank wants rates to go up whatever
  happens. But it also does not want them to fall. Above all it
  wants to wait to see how the unions wage round goes."
      In West Germany, unions and employers prepare the ground
  for triennial wage negotiations based on detailed assessments
  of growth and inflation, economists said.
      Ute Geipel, economist with Citibank AG, said if the
  Bundesbank became more accommodating in monetary policy,
  raising fears in some quarters of a return in inflation in the
  medium term, unions would be obliged to curtail wage demands.
      As a result the Bundesbank was concerned to make no move
  that would interfere in the negotiating process, Geipel said.
      In the current round, the country's most powerful union,
  the IG Metall representing metalworkers and engineers, is
  demanding a shortening of the working week to 35 hours from the
  present 38-1/2 and an accompanying five pct increase in wages.
      The engineering employers' association, Gesamtmetall, is
  offering to bring in a 38-hour-week from July 1, 1988, and give
  a two stage wage increase -- a 2.7 pct rise from April 1 this
  year and another 1.5 pct from July 1, 1988.
      The agreement forged by IG Metall -- Europe's largest
  union, with 2.5 mln members -- and the employers would set the
  benchmark for settlements in other industries such as the
  public sector, banks and federal post office. Negotiations
  began in December and unions are hopeful they may conclude by
  early April, ahead of the traditional holiday period in June.
      Though many economists said the unions' current warning
  strikes and rhetoric were part of the negotiating strategy and
  would not lead to a repeat of 1984's damaging seven-week
  strikes, others said unions would not compromise greatly on
  their positions and there could still be conflict.
      This could extend the length of time in which the
  Bundesbank would keep its activity low-key, economists said.
      The money market head said the unions' humiliation by the
  protracted financial problems of the Neue Heimat cooperative
  housing venture would contribute to union obstinacy.
      "The unions haven't forgotten that and they will put this
  squarely onto the account in the negotiations," he said.
      In addition, the newly-elected chairman of the IG Metall
  union, Franz Steinkuehler, was more radical and determined than
  his predecessor Hans Meyer and may be set for a longer battle
  to achieve the best possible settlement for his membership.
      More than 16,000 engineering workers at 45 firms, mainly in
  south Germany, held warning strikes lasting up to two hours
  yesterday. Firms hit included Zahnradfabrik Passau GmbH and
  aerospace group Messerschmitt-Boelkow-Blohm GmbH.
      Today, 28,000 employees from 110 companies came out in
  warning strikes, a statement from IG Metall said.
      Money market dealers said that overnight call money rates
  would rise in the near future in any case and did not depend on
  a politically-inhibited Bundesbank.
      About eight billion marks were coming into the market
  tomorrow from salary payments by the federal government.
      As a result, some banks fell back on the Bundesbank's offer
  to mop up liquidity via the sale of three-day treasury bills,
  anticipating still lower rates before the month-end.
      But a pension payment date by banks on behalf of customers
  was due on Monday, other dealers noted. If banks were short of
  liquidity until the bills matured on Tuesday, rates could soar,
  perhaps to the 5.50 pct Lombard ceiling.
      Banks were well stocked up with funds, having an average
  52.1 billion marks in Bundesbank minimum reserves in the first
  24 days of March, well above the 50.7 billion requirement.