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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (10844)	8/5/2003 4:15:56 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95880

US CREDIT OUTLOOK-Treasuries toe the edge of new bear trend Tuesday August 5, 3:44 pm ET By Amanda Cooper biz.yahoo.com NEW YORK, Aug 5 (Reuters) - The recent slide in U.S. Treasury prices to their lowest levels in over a year suggests a nasty bear trend is about to emerge, analysts said at an industry gathering on Tuesday. The latest round of economic data has shown both the manufacturing and the services industries are picking up, and that the labor market, while still weak, is slowly improving. Ten-year Treasury yields have shot from historical lows in June to nearly 4.50 percent, their highest in a year in less than two months, in one of the worst sell-offs in the last 20 years, and some analysts think things could get much worse. The bond market slump was initiated by those anticipating economic recovery and compounded by an avalanche of selling from mortgage hedgers desperate to protect against increased borrowing costs as yields rose. Individual investors who bought Treasuries on their spectacular journey skywards have seen their investment sink under water and could be looking to bail. "I don't think foreign investors will be too worried because they will invest to maturity," Tom McManus, chief investment strategist and managing director of Banc of America Securities (News - Websites) told a conference in New York. "But individual investors are likely to have bought bonds at higher prices as stocks were getting sold because of disappointing returns. In the next couple of months there will be a statement saying they're low down on their bond investments and are looking for somewhere else to put their money," McManus said, speaking at the New York Society of Security Analysts (NYSSA) semi-annual market forecast meeting. FUNDAMENTALS SOURING FOR BONDS The economy is growing at a faster pace than many had thought, and unemployment, while close to nine-year highs at 6.2 percent, appears to be on the decline. U.S. equities (CBOT:^DJI - News; CBOE:^SPX - News) have picked up from their lows earlier this year, and after the second-quarter earnings season delivered a few pleasant surprises, bonds could be looking even less attractive than they do now, analysts said. Jason Trennert, investment strategist at International Strategy and Investment Group Inc. (ISI Group) told the NYSSA meeting that a secular bear trend, a long-term trend which does not reflect seasonal or technical factors, could be in place. "It seems clear that the Fed is intent on stimulating the economy at any cost," Trennert said. But even though recent data is pointing to an improvement, and Tuesday's auction by the U.S. Treasury of new three-year debt was something of a flop, some analysts urge caution in writing off the bond market so quickly. Stephen Roach, chief economic strategy at Morgan Stanley, said a record-low level of individual savings and a historically large current account deficit alone would be enough to hamper recovery and even tilt the U.S. economy back into a downturn. He said other obstacles to full recovery were high unemployment and excess capacity swilling around from the prosperous 1990's when technology companies particularly invested in new production capacity, only to face the bursting of the tech-stock bubble in 2000. "The economy has come off three pretty soft quarters. There may be more strength coming in the second half, but the quality of the recovery in the United States...is not good," he said. "This is not a tremendous recovery and it's taking a tremendous amount of stimulus. I would not be surprised to see a relapse in 2004," he said. This week's data calendar is fairly thin, although next week ushers in inflation figures for July, retail sales figures that mirror consumer spending, and industrial production. Also, the Federal Reserve holds its policy-setting meeting on August 12 at which it will most likely keep rates at 1.00 percent, as markets are ruling out any chance of a cut. The Treasury Department auctions another $18 billion tranche of new five-year debt on Wednesday and $18-billion worth of 10-year paper on Thursday. The market is already depressed and Tuesday's sale of three-year debt at 2.422 percent, that attracted a bid-to-cover ratio of just 1.23, does not bode well for the next two sales. "There's a growing (conviction) that the economy is picking up steam, which is negative for Treasuries," said John Canavan, market analyst at Stone & McCarthy Research Associates. I'm sorry Don for the upheaval here today. Thanks for your insightful comments. Perhaps we will get it right one day and make our fortunes. RtS