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Strategies & Market Trends : Natural Resource Stocks

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To: isopatch who started this subject	11/11/2003 9:53:21 AM
From: isopatch	Read Replies (1) of 108826

Bond Market commentary from Rate Brief (via Yahoo news) <Nov 10 2003 - The Interest Rate Outlook: The finepoints of the weekly outlook are better detailed in Monday morning's Bond Brief. 10-year and other benchmark yield charts are linked off the Charts and Data listing. Long term interest rates remain volatile under the weight of strong economic growth and a continued decline in core inflation. The 10-year yield hasn't been able to hold above 4.5% and currently stands at 4.43%. This week's economic news shouldn't offer much reason for higher rates (flat retail, PPI, indust prod) though the refunding auctions will provide some push higher only to fall off next week. The monthly outlook depends on the developing economy as the market now better respects expectations for stronger growth ahead after the booming pace of Q3. The continued ballooning in Treasury supply adds another push higher to long term rates. The market has priced out any expectation for Fed policy changes in 2003. 10-year yields should hold below the 50-day high of 4.6% but the market is jittery given the stronger growth outlook. The disinflation doesn't end until growth tops 4% for a few quarters and demand strengthens pricing power. However, improving economic fundamentals are likely to carry stronger weight than core inflation as far as bond yields are concerned. Expect the slow upward trend to continue. The outlook through year end includes a far stronger economy dependent largely on the pace of business investment. The short term rate outlook remains neutral as the Fed will delay any tightening until the economy is firmly back on both feet and core inflation and unemployment trends turn with the stronger growth. The weak labor market, manufacturing, business investment and core prices are the Fed focal points. The outlook for the fourth quarter remains strong despite the booming pace of Q3. We expect improving economic growth will soften the disinflation concerns over time but long term rates shouldn't lift above 4.7% by year-end given the weak core inflation. Fed tightening (short term rates) has been pushed off to mid 2004. Stronger economic growth will provide a lift in pricing power and inflation and add more force to the upward trend in long rates.>

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