From DJ:
an Shepherdson, chief U.S. economist at High-Frequency Economics in Valhalla, N.Y., said it is too early to declare an imminent end to rate increases and victory over inflation. An energy-induced rise in the headline inflation rate could trim consumer spending power and, if it lasts long enough, eventually prompt demands for higher wages to compensate, he said.
"If they are successful, then other things equal, unit labor costs will accelerate, pushing up the costs of all non-energy goods and services," Shepherdson said.
He noted that oil prices haven't climbed as high in real terms as they did in the 1970s. But he also said that "it is too soon to argue that all danger has passed."
Looking ahead, Treasurys may get a bigger catalyst for trade with existing homes sales for December on Wednesday and new homes sales Friday.
AIG Sun America's Cheah said the housing data could well spark trading activity in Treasurys. Strong data could keep the Fed on the path for more rate hikes than currently forecast, while slower housing activity would soothe such a concern, he said.
The housing figures are slowing, an outcome the bond market expects will become pronounced during this year and herald a much weaker consumer and wider economy.
Remy said data on December durable goods orders and advance fourth-quarter gross domestic product growth may also provide some trading momentum for bonds.
Earlier Tuesday, the Richmond Federal Reserve said its January manufacturing index was -4 versus December's reading of -2. The shipments index was -7 versus 1, while the services revenues index edged up to 19 from 18 for the period. |
