I believe they'll hold interest rates low and not raise them for some time....
Should be for steady for many many moons
Bullish
NEW YORK - Treasurys fell Wednesday after it was reported the U.S. economy managed a slight gain in the final months of last year not the decline most economists were looking for.
The latest data support a widespread belief the Federal Reserve will hold its target interest rate at a 40-year-low 1.75 percent when the group concludes a two-day meeting later Wednesday. Financial markets can expect an announcement from the central bank about 2:15 p.m. Eastern.
Bond players will comb through the Fed's comments, looking for clues the increasing odds for a rate increase later this year now priced into the market are justified.
Eurodollar futures, short-term Treasury yields and the federal funds futures markets are priced for one or possibly two rate hikes by the Fourth of July. But private-sector economists see a more cautious Fed and steady policy prevailing for much of the year. Read a preview of the Fed meeting.
The U.S. struggled into the black in the fourth quarter, eking out a 0.2 percent annualized increase in real gross domestic product, a Commerce Department report showed.
Consumer spending grew at a 5.4 percent rate, largely due to the $79.6 billion surge in auto sales. Businesses cut their investment spending by 12.8 percent and slashed a record $120.6 billion in inventories. Get the full story.
"The more inventories you've worked off, the better off you are looking ahead," said Bill Cheney, chief economist with John Hancock Financial Services. "The shelves have to be restocked and even a modest increase in orders will push the economy into positive territory moving ahead. If things get back to even close to normal, we could see a big pop in first-quarter GDP growth."
"I think it's way too early to call this 'the' recovery, even though today's report was a lot better news than the markets were expecting," he said.
At last check, a 2-year note fell 3/32 at 99 30/32 to yield 3.02 percent or a gain of 4 basis points from the previous session. A 5-year note fell 4/32 at 96 22/32 to yield 4.27 percent or a gain of 3 basis points.
The benchmark 10-year Treasury note was off 7/32 at 100 7/32 to yield ($TNX: news, chart, profile) 4.27 percent or a gain of 3 basis points, while the 30-year government bond erased 11/32 at 99 16/32 to yield ($TYX: news, chart, profile) 5.41 percent or a gain of 2 basis points.
Treasurys were on the defensive in part as participants prepare to absorb new debt to go on the block next week as part of the government's quarterly refunding.
Treasury will sell $16 billion more of a previously issued 5-year note on Tuesday, Feb. 5 and $13 billion of a new 10-year note on Feb. 6.
Separately, the Treasury Department announced Wednesday it would continue to buy back outstanding U.S. debt securities, at least through April.
After that, the agency will continue to make buyback announcements at its quarterly refunding briefings. Read more.
The Dow Industrials are now at the index's lowest intraday level since Nov. 13 and the Nasdaq, its lowest point since Nov. 21.
In recent action, The Dow Jones Industrial Average ($INDU: news, chart, profile) sputtered 38 points, or 0.4 percent, to 9,580. The Nasdaq Composite ($COMPQ: news, chart, profile) gave back 26 points, or 1.4 percent, to 1,866. Read more in Market Snapshot.
In the currency sector, the dollar dropped 0.6 percent to 132.70 yen while the euro erased 0.1 percent to 86.44 cents.
The dollar weakened against the yen following a Wall Street Journal article revealing that General Motors complained about the Japanese currency's weakness to Treasury Secretary Paul O'Neill. A weak yen makes Japanese exports more competitive on U.S. markets. |
