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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (14354)	6/11/2000 4:35:00 PM
From: Justa Werkenstiff	Respond to of 15132

Global Credit Markets: US Treasury Yields Hold Near 6-Wk Lows New York, June 9 (Bloomberg) -- The following is a summary of major credit market activity around the world: NORTH AMERICA U.S. Treasury yields held near the lowest levels in six weeks as a producer-price report showing benign inflation bolstered speculation the Federal Reserve may keep interest rates on hold this month. ``My suspicion is the Fed will ultimately take a pass at the June meeting,'' said Glenn Baker, who in the past two weeks has added Treasuries maturing in 15 to 30 years and corporate debt to the $24 billion he manages at Brown Brothers Harriman & Co. Still, policy-makers ``will raise another 25 to 50 basis points at the meetings following.'' That will push the yield on the two-year note, which Baker is steering clear of, to 7 percent, from 6.54 percent now, he said The most-actively traded 10-year note held at a price of 102 23/32, as did its yield, at 6.12 percent. The most active two-year note was unchanged at 100 5/32, as did its yield. The 30-year bond rounded out a third winning week, boosted by signs growth and inflation are cooling and expectations the government will use its budget surplus to further limit the supply of Treasuries. It gained about 3/4 this week, after falling 3/32 today to 105. Its yield rose 1 basis point to 5.89 percent. ``People are feeling a little more comfortable'' with the bond market, said Mitch Stapley, who invests $3 billion at the Kent Funds in Grand Rapids, Michigan, and bought some of the almost $20 billion of corporate debt sold this week. ``You have some people saying there is an end'' in sight for the Fed's rate increases, he said. Inflation Insight Treasury prices swung up and then down after a report showed producer prices were unchanged in May, while prices excluding food and energy jumped a bigger-than-expected 0.2 percent. Ultimately, many economists concluded the report ``is neutral for the Treasury market and shouldn't change the outlook for the Fed,'' said Henry Willmore, chief U.S. economist at Barclays Capital. Demand for Treasuries waned as the Nasdaq Composite Index gained 1.3 percent, giving investors less reason to buy fixed- income investments. ``One of the reasons people had been holding Treasuries was as a hedge against their equity positions,'' said Mike Cloherty, a strategist at Credit Suisse First Boston. ``On a day like today, there's less reason to fear the worst.'' Investors have also been trading in government debt for corporate securities to capitalize on their fat yields. That buying over the past week, one of the heaviest for corporate bond sales this year, pushed the yield on the average investment-grade corporate security to 1.97 percentage points more than the 10-year Treasury, down from a decade-high of 2.02 percentage points a week ago. Corporate Debt to Outperform Corporate yields will fall faster than Treasuries', producing superior returns for investors in coming weeks and months, said Baker at Brown Brothers investments, who has been buying corporate debt maturing in about five-years. Kirk Hartman has also been snapping up shorter-maturity corporate debt securities for the $100 billion he handles as chief investment officer at Banc of America Capital Management in Los Angeles. He expects the economy to slow, though not too much to hurt corporations' ability to repay their debt. ``We're looking at a soft-landing scenario and the inflation numbers so far have been subdued, and that's good for the credit markets,'' Hartman said. Expectations remain mixed about whether the Fed will raise interest rates at the June 27-28 meeting to further damp inflation. The implied yield on the July fed funds futures contract, a gauge of investor expectations of Fed's target for overnight lending by that time, was unchanged at 6.625 percent. When compared with the current fed fund target of 6.5 percent, it shows some investors still expect an increase. The 6.82 percent yield on the September contract points to expectations of at least a quarter-point increase by the Aug. 22 Fed meeting. More Indicators The outcome of the Fed's June meeting is likely also to hinge on several economic indicators due in the next two weeks, including the May consumer price index and retail sales. The Fed already raised rates 1.75 percentage points in the past year, most recently by a half-point in May. ``Whether or not the Fed raises rates in August will depend more on the consumer price index and wage inflation measured by the employment cost index and report,'' said Henry Willmore, chief U.S. economist at Barclays Capital.