Greenspan Sounds Inflation Alert
Bonds continue to trade lower following Fed Chairman Greenspan's
Humphrey Hawkins testimony yesterday. Thirty-year bonds are down 9/32,
yield 5.99%. Two-year notes are down 1/32, yield 5.54%. Prior to
Greenspan's testimony, the thirty-year yielded 5.87% while two-year
notes yielded 5.39%.
Greenspan expressed concern the economy may be expanding at too fast
of a pace. He is concerned that if the labor market continues to grow,
inflationary pressures will be ignited. He also stated that if
productivity so much as stalls, inflation will become a problem. The
Fed will act "promptly and forcefully" on inflation signs. This
comment would appear to indicate that a rate rise of 50 basis points
might be in the offing.
Greenspan did point out that the Fed does want to see more economic
data for evidence of problems before acting. The next FOMC meeting is
8/24. We will want to monitor the following economic releases very
carefully: second quarter GDP and the employment cost index 7/29, the
personal income deflator 7/30, unemployment 8/6, PPI 8/13,
productivity 8/15 and CPI 8/17.
The yen continues its ascent against the dollar. It is now up 3.0% in
the past two months, despite massive currency intervention. Much
foreign money is flowing into Japan, as it is perceived their economy
is firmly on the path to recovery. The dollar currently stands at
116.45 yen.
Five German states reported inflation running in the .4%-.5% area.
This compares to 0%-.2% reported previously. This, coupled with
stronger inflation reported by Italy yesterday, is raising the
probability of a European Central Bank tightening.
No economic data today. Next week will bring lots of data, the most
important being our first look at second quarter GDP and the
employment cost index.
Have a great weekend. bonds-online.com
>>>Percent of stocks above moving averages
>>> 7/22/99 7/22/99 7/15/99
>>> 3500 stocks NDX NDX peak
>>> 10-day 36% 24% 77%
>>> 21-day 47% 40% 80%
>>> 50-day 56% 69% 82%
>>>200-day 65% 78% 86%
>>>
>>>Still, too many stocks above 21-day MAs for much of a short-term
>>>trough. |
