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To: Tom M who wrote (75874)	9/5/2001 10:01:26 AM
From: long-gone	Read Replies (2) \| Respond to of 116927

More on how the banksters wish us to use nothing but excessive credit at times BUT: Tuesday September 4, 5:43 pm Eastern Time US CREDIT OUTLOOK-Bonds slouching toward jobs data By Ellen Freilich NEW YORK, Sept 4 (Reuters) - After stumbling over a stronger-than-expected NAPM manufacturing report on Tuesday, the first trading session of a holiday-shortened week, U.S. bond prices could cling to their pared down levels until U.S. employment data for August come out on Friday. -------------------------------------------------------------------------------- An August employment report offering evidence that the economy remains at risk of greater weakness would let bond prices recover some of the ground lost as a result of the NAPM report, analysts said. Some, but not necessarily all, they said, because bonds are also wary of the potential for strong, rebate-enhanced August retail sales data, due a week later. The National Association of Purchasing Management reported on Tuesday that its monthly manufacturing index rose to 47.9 in August from 43.6 in July, above economists' forecast of a reading of 43.9. ``The NAPM report raised the stakes for Friday's employment report enormously,'' said Anthony Karydakis, senior financial economist at Banc One Capital Markets. ``Now Friday becomes a hugely important day because people will be drawing conclusions as to whether the (Federal Reserve) is done (cutting interest rates).'' The Fed has cut interest rates seven times this year, the last time on Aug. 21 when the central bank cut the federal funds rate by a quarter percentage point to 3.5 percent. Treasury yields, which move opposite to price, fell across all maturities in the past week. Yields on five-year notes hit their lowest level in more than 2-1/2 years, while two-year note yields hit new historic lows at 3.58 percent on Thursday. Those yields rose on Tuesday after the NAPM report. In late trade, the two-year yield had risen 20 basis points from its low-point on Thursday, to 3.78 percent. Economists polled by Reuters do not expect Friday's payroll data to look robust enough to deliver the second part of a one-two punch to the bond market's hopes for further rate cuts. On average, they estimated that U.S. payrolls shed 33,000 jobs in August after losing 42,000 in July. They calculated that the unemployment rate rose to 4.6 percent in August from 4.5 percent in July. ``The NAPM was taken seriously, but it's a single report in a stream of otherwise weak reports,'' said Karydakis. ``But if the employment report comes in strong, there will be no excuses; the bond market will fall apart and the two-year yield will very quickly move above 4 percent, and worse.'' If the August payroll data show that labor market deterioration is still very much a part of the economic picture, the bond market will rally, Karydakis said. The reason the bond market needs weak employment data to sustain its hopes for further Fed rate cuts is that the NAPM report for August hinted that the manufacturing sector may have halted its year-long deterioration. ``The economy may have stopped falling to pieces, but a recovery will depend on demand picking up,'' said Dominic Konstam, head of interest-rate strategy at Credit Suisse First Boston. A weakening labor market would threaten any sustained revival in consumer demand, thus inhibiting any meaningful economic recovery, he said. Even if the August NAPM report is accurate in hinting that output is stabilizing in the industrial sector, a lot of people are still losing their jobs, Konstam said. ``That's why you should be cautious about calling an end to the (economic) downturn,'' he said. Economic data due(cont) biz.yahoo.com