Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Oral Roberts who wrote (41592)	6/5/2003 3:22:06 PM
From: MulhollandDrive	Read Replies (2) \| Respond to of 57110

spotlight on unemployment Treasuries yields set new low on ECB cut, jobs Thu June 05, 2003 By Amanda Cooper NEW YORK, June 5 (Reuters) - U.S. Treasury yields set record lows on Thursday as the European Central Bank's rate cut fueled prospects for the Federal Reserve to ease when it meets at the end of June. The latest round of economic data was supportive to bond prices, with weekly jobless claims rising more than expected and April factory orders posting their largest fall in 17 months. The yield on the benchmark 10-year note dropped to a low of 3.24 percent, its lowest level in 45 years. Analysts said Fed Chairman Alan Greenspan's renewed call for vigilance against price deflation on Tuesday still resonated in the financial markets and was amplified by the European Central Bank's decision to cut its benchmark refinancing rate by 50 basis points to 2.00 percent. "There's the ongoing perception of a positive Fed, the ECB is coming to grips with reality and jobless claims were up substantially, which has to be a Fed issue and has to be looked at as a market positive," said John Spinello, fixed income strategist at Merrill Lynch Government Securities. In a statement, the ECB said the outlook for price stability over the medium term had "improved significantly" since its last decision to lower interest rates in March. The ECB also said it aimed to maintain inflation rates "below but close to 2 percent over the medium term." In Washington, the Labor Department said the number of people applying for initial jobless benefits rose by 16,000 last week to 442,000, the highest level in more than a month. Economists had forecast new jobless claims would total 420,000. "I don't really think today's rally was that influenced by the data. I think this is firstly a residual effect from Greenspan on deflation ... and tomorrow is the (May) employment report. That is the focal point and has been all week. No one has the courage to trade from the short side until the number is out of the way," said Brian Robinson, bond strategist at 4CAST Ltd. SPOTLIGHT ON UNEMPLOYMENT The market expects a rise in the May jobless rate, which also encouraged bond bulls. Average forecasts peg May's decline in payrolls at 39,000 while the jobless rate is expected to rise to 6.1 percent from 6.0 percent in April. Merrill Lynch's Spinello said 30-year bonds had risen sharply in part because they had lagged the rest of the yield curve for the last week-and-a-half and partly because of hedging ahead of a huge Illinois taxable pension bond issue. The Illinois sale was increased to $10 billion from the originally planned $6 billion. The bulk of the bonds, or $7.65 billion, matures in 2033, 30 years from now. "The rate-lock unwind on the Illinois deal will give us a bid in the back end (of the maturity curve)," Spinello said. Two-year yields US2YT=RR remained near record lows at 1.20 percent, down one basis point and below the Fed's 1.25 percent funds rate, a strong signal investors expect a cut at the bank's next policy meeting later this month. "Twenty-five (basis points) would be an insurance cut. Fifty is much more insurance than needed given the perception that we will have strong growth in the second half," said 4CAST's Robinson. "I don't think the Fed has to do anything (in response to the ECB cut) except possibly validate what the market is discounting, which is a 25-basis point cut, although there are people who think if the employment report is weak, the Fed could cut by 50 basis points," he said. Eurodollar 0#ED: and Fed funds interest rate futures 0#FF: , which gauge market expectations on U.S. rates, rallied after the ECB said it cut euro zone rates. The July Fed funds contract FFN3 is fully pricing a 25-basis point cut and showing a 50 percent chance of a half-point cut by the end of July. The 5-year note US5YT=RR gained 2/32 in price to yield 2.16 percent, down from 2.18 percent late on Wednesday, while the benchmark 10-year note US10YT=RR was 9/32 higher to yield 3.26 percent. The more volatile 30-year bond US30YT=RR added three basis points to yield 4.30 percent. -------------------------------------------------------------------------------- © Copyright Reuters 2002. All rights reserved. Any copying, re-publication or re-distribution of Reuters content or of any content used on this site, including by framing or similar means, is expressly prohibited without prior written consent of Reuters. Quotes and other data are provided for your personal information only, and are not intended for trading purposes. Reuters, the members of its Group and its data providers shall not be liable for any errors or delays in the quotes or other data, or for any actions taken in reliance thereon.