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To: Jim Willie CB who wrote (4665)	6/4/2003 9:10:19 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Greenspan Is Upbeat on Economy and Stirs Hope of More Rate Cuts By DAVID LEONHARDT >>That level suggests either that investors believe strongly that the Fed will cut the rate by a quarter-point or that they think there is a one in two chance that the rate will fall by a half-point.<< WASHINGTON, June 3 — Alan Greenspan, the chairman of the Federal Reserve, said today that the economy had stopped deteriorating last month and that he saw "the makings of a turnaround." He also said that inflation was "not something of significance for the Federal Reserve to be concerned about" now, causing investors to believe that the Fed is willing to bolster the economy by cutting short-term interest rates even further when it meets later this month. Mr. Greenspan's remarks, made by satellite to a bankers' conference in Berlin, was the clearest version yet of a carefully scripted message he has been delivering over the last month. His comments have contributed to the unusual combination of increases in both stock and bond prices, making an economic rebound more probable. The Standard & Poor's 500-stock index rose 4.56 points, or 0.5 percent, to 971.56 today and is 4.5 percent higher than it was one month ago. The price of 10-year Treasury notes also rose, causing the interest rate on them to decline, to 3.33 percent. When investors become hopeful about the economy, they typically sell bonds, which are a more conservative investment than stocks. By emphasizing the positive signs he has seen, like a fall in both energy and finance costs, Mr. Greenspan has contributed to the recent rise in confidence among consumers, executives and stock investors. He said today that there had recently been "a dramatic reversal in all of the various different elements" that had been harming the economy early this year. But by noting that the Fed remains concerned about deflation, a sustained decline in prices that can cripple an economy, Mr. Greenspan has signaled to bond investors that interest rates will probably remain low for months and could even fall further. Investors have responded by bringing down long-term interest rates, which determine the cost of mortgages and many other loans, even as they have bid up stocks. "He's separated out the two groups on Wall Street and he has played them both off each other," said Drew T. Matus, an economist at Lehman Brothers. Mr. Greenspan emphasized today that the evidence of a recovery remained too scant for him to be confident of what would happen next. "There is some indication of return" to faster growth, he told the bankers, "but it is at this stage not by any means clear." He spent much of his opening remarks, which were part of a panel of central bankers, listing reasons to be optimistic, including a pickup in consumer confidence and the additional money that the recently signed tax cut will give many households. Most important, he said, stocks have risen and interest rates have fallen on junk bonds, which are issued by companies whose prospects investors consider questionable. He added that the change in these credit markets suggested "a fairly marked turnaround" for the economy. After falling into recession in March 2001, the economy began growing again late that year. So far, though, the growth has been too weak for companies to add workers, and the economy has lost more than two millions jobs since early 2001 while wages have stopped growing more quickly than inflation for many workers. In recent weeks, Mr. Greenspan has said that he expects growth to accelerate once the uncertainty over the war in Iraq passes. His remarks today were the first time he has publicly said that he has begun to see evidence of actual improvement. For it to continue, Mr. Greenspan said, both the weekly and monthly economic data released by the government and private groups "have got to start to move in a positive direction fairly quickly." Automakers, whose sales Fed officials follow closely, reported today that cars and trucks sold at an annual rate of 16.1 million vehicles in May. That was better than the 15.7 million rate a year earlier but a marked slowdown from sales at the end of 2002. Mr. Greenspan also continued to explain the radical change in the Fed's stance toward inflation. After decades of fighting aggressively to keep prices from rising rapidly, the Fed has become worried that the long economic slump could cause prices to begin declining, raising the effective cost of debts as each dollar became more valuable and causing consumers to cut spending in anticipation of future bargains. Today, Mr. Greenspan called the risk of deflation very small but said that its damage could be severe if it took hold. Because inflation appears so unlikely in coming months, the Fed remains willing to take out "insurance against economic weakness," he said. Investors seemed to interpret his comments as openness to a new reduction in the Fed's rate on overnight loans between banks, which is now 1.25 percent. The rate on a futures contract based on the benchmark fell today to 1.05 percent. That level suggests either that investors believe strongly that the Fed will cut the rate by a quarter-point or that they think there is a one in two chance that the rate will fall by a half-point. nytimes.com

To: Jim Willie CB who wrote (4665)	6/4/2003 9:20:03 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Treasury Yields Hit Record Low Tuesday June 3, 4:29 pm ET By Wayne Cole >>Analysts noted that the more Fed officials refer to a "minor" or "remote" threat of a persistent drop in prices, the more prominent the danger becomes in the minds of investors.<< NEW YORK (Reuters) - Short-term U.S. Treasury yields cratered at record lows on Tuesday as the mere mention of deflation by Federal Reserve Chairman Alan Greenspan sent bond bulls baying for a rate cut. Speaking by satellite to a conference in Berlin, Greenspan noted that while deflation was unlikely, the cost of taking insurance against it was "very small indeed." That overshadowed otherwise optimistic comments on the economy and fueled talk that not only might the Fed ease policy, it could also take unconventional steps such as buying longer-term Treasuries. "I think Greenspan was pretty clear about the Fed's intentions to cut and that should remove any lingering doubts in the market that they will ease this month," said Jack Malvey, global fixed-income strategist at Lehman Brothers. It also coincided with dovish outlooks from the Euro-zone, Japan and Canada, giving bonds a world-wide boost. "This push toward easing is a global phenomenon," said Malvey, noting that a fall in JGB yields below 0.50 percent was a "seminal event." "That should encourage more fund flows out of Japan, which has to be good for assets elsewhere." In the United States, two-year yields crashed below the Federal funds rate, a rare event -- this is just the sixth time in 14 years -- which has led to official cuts in the past. The two-year note (US2YT=RR) surged 6/32 in price, taking yields to an all-time low of 1.20 percent from 1.31 percent late Monday. The Fed funds rate has been at a four-decade low of 1.25 percent since Nov. 6. Likewise, five-year yields (US5YT=RR) hit a record trough of 2.19 percent, down from 2.33 percent on Monday. Eurodollars (0#ED:) also rallied hard as did Fed funds futures contracts, where the July contract (FFN3) is now pricing in over an 80 percent chance of a 0.25 point easing at the central bank's next meeting on June 24-25. Adding to the feeding frenzy were rumors a Washington-based think tank had told clients the Fed was near easing and that, if it went, it would be by a full 50 basis points. THAT "D" WORD The emphasis on deflation meant there was plenty of demand for long-dated debt as well. The benchmark 10-year note (US10YT=RR) jumped 22/32 for a yield of 3.33 percent, down from 3.41 percent. Thirty-year bonds (US30YT=RR) were up 1-3/32, their yield easing to 4.36 percent from 4.43 percent. Analysts noted that the more Fed officials refer to a "minor" or "remote" threat of a persistent drop in prices, the more prominent the danger becomes in the minds of investors. "Every time you hear a Fed governor talk, they mention a slight chance of deflation, but you always hear the word," said Vincent Verterano, head government bond trader at Nomura Securities. "Since they harp on that word, the Street keeps on hearing it and says there must be something to it." Fed policy-markers have touted various remedies for deflation, including buying longer-dated Treasuries. "The Fed has published enough papers suggesting they might buy the longer-end, so the market's drawing the obvious conclusions," said John Roberts, head of government trading at Barclays Capital. "Then again, Greenspan also said deflation was unlikely, but it seems the market doesn't want to hear that." The Fed was not the only central bank taking insurance. European Central Bank governor Wim Duisenberg sparked a big rally in euro debt by sounding less concerned about inflation, feeding speculation the bank would cut interest rates by 50 basis points when it meets on Thursday. And the Bank of Canada surprised many by taking a far less hawkish stance on inflation, instead emphasizing the risk to economic growth. The about face convinced markets to sharply scale back the risk of further rate hikes and again drove bond yields broadly lower. biz.yahoo.com

To: Jim Willie CB who wrote (4665)	6/4/2003 9:28:34 AM
From: 4figureau	Read Replies (3) \| Respond to of 5423

Visa USA passes $1 trillion mark in U.S. volume With scores of people out of work or making less money than a few years ago, consumer debt continues to rise, and nowhere is this more evident than in the latest report from Visa USA, which tallied a record $1 trillion in transactions in a 12-month period. The San Francisco company -- which is the world's largest payment brand and consumer payment system -- said an average $32,000 went through Visa systems every second of every day during the 12-month period ended March 31. That represents almost 10 percent of the U.S. Gross Domestic Product. Put a different way, that means $12 of every $100 consumers spent in the year-long period was spent on a Visa card. More than $38 of every $100 spent is done so with payment forms other than cash or checks, using Visa or not. Visa's $1 trillion figure is greater than the combined volume of all other U.S. payment organizations, including MasterCard, American Express and Discover. Visa credit cards represented the largest share of volume with $544 billion during the year, while Visa check cards represented $395 billion, or more than one-third of Visa's total volume. There are more than 396 million credit, debit, commercial and prepaid cards using the Visa name worldwide. The prepaid cards showed the highest volume of growth year-over-year at 110 percent, though comparative figures were not released. sanfrancisco.bizjournals.com