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To: Jim Willie CB who wrote (4458)	12/5/2003 4:53:26 PM
From: Ruffian	Read Replies (1) \| Respond to of 108662

Rates Seen on Hold for Now Friday December 5, 3:34 pm ET By Victoria Thieberger NEW YORK (Reuters) - A surprisingly soft U.S. payrolls report for November on Friday quelled market fears that the Federal Reserve will start to raise interest rates in the first half of next year. After the employment report, which showed only around one-third of the expected growth in jobs, the bond market and futures markets sharply pared back their bets on when the central bank will tighten rates, now at 45-year lows. ADVERTISEMENT But a Reuters survey taken on Friday after the payrolls report found economists divided over whether the Fed would change its statement on the economy after next Tuesday's policy meeting, a topic of keen debate in markets in recent weeks. Almost none of the economists polled expect a change in the Fed's outlook on the balance of risks to the economy. However, 10 of 22 economists surveyed said that a closely watched promise to keep interest rates low for "a considerable period" will be softened, or dropped, next week to get rid of the perceived time reference on the outlook for policy. Most of those analysts expect Fed officials will replace it with some other phrase that communicates the idea that the central bank will remain patient before raising rates. "It doesn't really matter what they do to this language, because they're not changing their basic message," said Goldman Sachs chief economist Bill Dudley. Bond market yields dropped sharply through the day. The two-year Treasury note yield, the most sensitive to views on Fed rate policy, dropped by the largest amount since the Sept. 11, 2001 attacks. The yield is now 86 basis points above the Fed's benchmark federal funds rate, down from 115 basis points earlier in the week. A basis point is one hundredth of a percentage point. The Reuters survey found the vast majority of economists expect no change in rates until the middle of next year at the earliest, and several see rates on hold into 2005. Only 57,000 new jobs were created in November, well below market expectations for about 150,000 and whispers of a number in the region of 200,000. Offsetting that news was an unexpected decline in the unemployment rate to 5.9 percent from 6.0, which is based on a separate survey of households, although the pool of available workers shrank by 4 percent. INFLATION STILL DORMANT Federal Reserve officials have been at pains to emphasize in speeches throughout November that even though the economy has picked up speed, inflation remains tame, meaning there is no pressing need to tighten monetary policy. The relatively small increase in jobs in November underscored the fact that much of the recent economic growth has come via productivity gains. Hiring has trailed far behind the usual path of job creation during economic recoveries. "Employment is nowhere near where the Fed wants it to be. We still have a tremendous amount of excess capacity and we're just at the very, very beginnings of the process of using up that spare capacity," said Bill Quan, director of research at Mizuho Securities. "This is a reality check because people have gotten way ahead of themselves in trying to handicap monetary policy tightening." Short-term interest rate futures, which bet on the path of Fed policy, pushed back the implied timing of an official rate rise after the jobs report. Chicago Board of Trade (News - Websites) Fed funds futures (FFK4) show a 70 percent chance that the Fed will raise rates by 25 basis points in May, after fully factoring in such a move on Thursday. Odds of the Fed hiking rates in April (FFJ4) were slashed to about 22 percent from 48 percent on Thursday. "(The payrolls report) drives the point home that the strong economic growth we're seeing is not accompanied by any respectable employment growth," said Banc One Capital Markets senior financial economist Anthony Karydakis, adding the Fed will be "very patient" before it considers tightening. He saw little chance the Fed will tinker with its comment on the "considerable period" of low rates. "In all likelihood, the Fed will keep most of the key points of the statement intact and they will not consider tightening policy until the middle of next year," he said.

To: Jim Willie CB who wrote (4458)	12/5/2003 5:00:57 PM
From: yard_man	Read Replies (1) \| Respond to of 108662

>>that is precisely how and why longterm interest rates will rise Asians will be sellers of TBonds generally<< they gotta fight the inevitable a little while longer and lose, lose, lose - like today -- yields drop right along with the dollar -- also there will be reallocation here from stocks to treasuries .... You'll get your higher rates, but everything has to go to heck and it has to even dawn on most here, before you see the rates on treasuries rise -- lot's of other debt will be trashed first, IMO.