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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (2041)	8/2/2002 2:42:52 PM
From: Proud_Infidel	Respond to of 25522

Treasury Yields Dive on Fed Speculation By Kyle Peterson CHICAGO (Reuters) - Yields on two-year U.S. Treasury notes dived to record lows on Friday after weaker-than-expected U.S. jobs data hammered U.S. stocks and bolstered growing speculation the Federal Reserve might have to resume its easing trend. Yields on two-year notes dropped below 2.0 percent for the first time ever, breaking the previous intraday trough of 2.02 percent and bringing the fall for the last three sessions to a huge 49 basis points. The Treasury rally came as all the major equity indices (CBOT:^DJI - News; CBOE:^SPX - News; NasdaqSC:^IXIC - News) lost over 2.0 percent, U.S. July payrolls figures proved surprisingly weak and an influential investment bank predicted the Fed would be slashing rates by year-end. "They're anticipating another rate cut. And as a result shorter-term maturities seem to be getting the benefit of the money going into the bonds right now," said George de Marcilla, head bond trader at Alaron Trading. "Just hold on tight. As long as the stock market is selling, people will want to be in bonds." Other support came from talk that a European financial institution was in trouble, though traders were unsure what to believe as rumor after rumor swept across the market. U.S. investment bank Goldman Sachs predicted the Fed would chop an additional 75 basis points from the 1.75 percent benchmark fed funds rate by year-end. Fed funds are already at 40-year lows after 11 rate cuts last year. Goldman shaved its gross domestic product (GDP) growth forecasts for the rest of the year and argued the Fed would want to ease to take out more insurance against the risk of a double-dip recession. Eurodollar futures surged head as investors rushed to narrow the odds of an easing with contracts as distant as December 2003 climbing more than 20 basis points. "That's basically saying that they're expecting the next move by the Fed to be an ease," said Steven Poser, president of Poser Global Market Strategies Inc. "We still have room to go after last year's yield lows," he said, referring to the November closing trough for 10-year yields around 4.19 percent. JOBLESS RECOVERY The July U.S. jobs report showed payrolls rose only 6,000 in July compared to analysts' forecasts of a 69,000 rise, though June's gain was revised upward to 66,000 from 36,000. The jobs report showed that the unemployment rate held steady at 5.9 percent as expected, but the average workweek suffered an unexpected 0.6 percent decline while manufacturing hours plunged 1.0 percent. "These figures were horrific," said Ifty Islam, head of fixed income strategy at Deutsche Bank Securities. "The drop in hours worked was a shocker and might force the Street to revise down its expectations for Q3 GDP growth." The rally in Treasuries might have been even bigger, said Islam, but many in the market were nearing mental exhaustion after the wild swings of recent weeks. "The last two weeks were probably the most volatile I've ever seen," groaned Islam. Just this week two-year yields recorded their biggest one-day rise in eight months as equities rallied, only to enjoy their largest one-day fall in 10 months when the flow of poor economic data provided a fundamental reason to buy bonds. On Friday afternoon, two-year notes (US2YT=RR) were 7/32 higher at 100-15/32, taking their yield to 2.01 percent from 2.13 late Thursday. The five-year note (US5YT=RR) jumped 19/32 to 105-4/32 to yield 3.21 percent against 3.35 percent. The benchmark 10-year (US10YT=RR) leapt 26/32 to 104-18/32, leaving its yield at four-decade lows of 4.29 percent. The 30-year cash bond (US30YT=RR) climbed 29/32 to 102-5/32, sending its yield to eight-month lows at 5.23 percent down from 5.29 percent on THursday. The September bond future (USU2) jumped 1-2/32 to 107-10/32.