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To: Jim Willie CB who wrote (46233)	10/26/1999 7:05:00 PM
From: T L Comiskey	Read Replies (1) \| Respond to of 152472

Jim...more fuel.....Fed: A Chorus Of Inflation Warnings NEW YORK (Reuters) - A chorus of inflation warnings from Federal Reserve officials pushed U.S. Treasuries prices lower Tuesday, as the bond market grew more convinced the Fed will boost interest rate next month. In late trading, the benchmark 30-year bond was at 96-19/32, down 3/8-point. Its, yield, which moves inversely to price, rose to 6.38 percent from 6.35 percent at Monday's close. If the bond holds at that level or weakens in late trading, the 6.38 percent would be the bond's highest closing yield since Oct. 22, 1997, when it closed at 6.42 percent. ``The market has got a real bad attitude; there's no doubt about it,' said Thomas Donne, who manages about $2 billion of fixed income debt at Banc One Investment Advisors on Columbus, Ohio. Monday, the bond's yield hit a high of 6.40 percent before a rally late in session. At the shorter end of the maturity range, the two-year note was down 2/32 at 99-11/32 Tuesday afternoon. Its yield rose to 5.99 percent from 5.95 percent. After opening a bit higher, Treasuries prices slumped around midday after Fed officials began making a string of hawkish-sounding comments. First, Richmond Fed President Alfred Broaddus said the current robust pace of U.S. economic growth was unsustainable. 'Inflation is a material risk in the outlook that needs to be taken seriously,' Broaddus said. Then, San Francisco Fed President Robert Parry said ``we face the risk of building inflationary pressures,' amid strong domestic spending and a pickup of growth abroad. Later, St. Louis Fed President William Poole cautioned against ``wishful thinking' on how much more productivity gains by American workers can attribute to the U.S. economy. Those remarks during the afternoon offset what were perceived to be market-friendly economic data and neutral comments from Minneapolis Fed President Gary Stern earlier in the day, who said productivity gains would more than likely last. ``We had good data this morning but we didn't do anything; that tells you that the natural tendency is (for bond prices) to go down,' Donne said. ``I don't see any reason to get excited about anything good happening soon. You have to be skeptical if you have a lot of cash. Take your time spending.' European central bank and hedge fund buying and short covering lifted the market early before dealer selling of December bonds at around the 110-28/32 level helped to reverse the gains. Still, Treasuries held in. ``The market is trying to determine what direction we should be heading in,' said James Caron, Treasuries strategist at Merrill Lynch Government Securities. ``It's not conclusive at this point.' He noted buyers seem to have emerged once yields tested their new two-year highs Monday. Some analysts, though, noted the start of talk in the market that Treasuries were close to breaching a number of long-term technical levels. Some were even murmuring that the market may be facing the end of the secular downtrend in rates that began in 1982 when bond rates peaked at 15 percent. ``You may have some signs that the secular declines in interest rates which began during Ronald Reagan's first term in the White House may be coming to an end,' said William Sullivan, head of money markets research at Morgan Stanley Dean Witter. But, he cautioned that it still may be premature to 'draw such grandiose conclusions' after such a short time. Earlier in the day, the market largely shrugged off what was deemed to be friendly economic news. The Conference Board said U.S. consumer confidence slipped for the fourth straight month, to 130.1 in October from 134.2 in September. Caution ahead of key U.S. economic data third-quarter Employment Cost Index (ECI) and Gross Domestic Product (GDP) due Thursday continued to restrain buyers, analysts said. ``It's going to stay that way until we get Thursday's numbers,' said Patrick Dimick, senior U.S. economist at Warburg Dillon Read LLC. ``There's a lot of apprehension about what's on the way with regard to ECI, and also about GDP.' Dimick said with the Fed ``firmly focused' on tightness in the labor market, the ECI is prominent in the market outlook. In late trade, the 10-year note was down 1/4-point at 98-8/32, yielding 6.24 percent. The five-year note was 1/8-point lower at 99-12/32, yielding 6.15 percent.