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Politics : Ask Michael Burke

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To: yard_man who wrote (45145)	1/31/1999 10:18:00 PM
From: Lucretius	Read Replies (1) of 132070

yea, I did. here's another keeper. Note the author. this should scare the crap out of the bond and stock bulls. I think the Japanese may have something to say about our debt going to 4%, ho ho ho The U.S. economy chugs along Bond yields should sink to 4.0 percent By Elaine Garzarelli, CBS MarketWatch Last Update: 5:40 PM ET Jan 30, 1999 Also: columns & opinion NEW YORK (CBS.MW) -- The real U.S. gross domestic product for the fourth quarter of 1998 came in at a 5.6 percent annual rate -- the highest in 2½ years -- while inflation hit a 40-year low. A big portion of this advance was due to the strong spending on cars and sport utilities. Without this, real GDP would have increased at a 3.5% rate. This outstanding strength was surprising to economists since expectations were for the international crisis to adversely affect growth in the U.S. economy. The numbers today showing the strength in the economy fueled the stock market as investors believed the strong growth will help company profits. Brazil has been discounted already as a major threat to the U.S. economy. The market now is focusing on a possible devaluation in China (we do not believe it will cause a large economic impact here), the new quarter's earnings reports, and next week's comments by Greenspan at the Federal Open Market Committee meeting (Tuesday and Wednesday). Interest rate, bond market analysis The smaller-than-expected increase in the employment cost index caused yields on Treasuries to end the week a bit lower. We believe the Fed is happy with the current state of the economy in the U.S. and will not likely act to change rates in the short run. We believe, however that the low inflationary environment gives the Fed room to ease in case the problems in Latin America cause significant problems here. As we mentioned before, we believe bond yields will decline due to low inflation and the budget surplus. We continue to look for the 10-year bond to decline to 4.0 percent.

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