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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (23237)	2/9/2005 1:48:04 PM
From: russwinter	Respond to of 116555

Ministry of Propaganda (MoP) member comes out more euchre, moral hazard and EZ money talk today. Can't these pediphile's stay away from children for more than a few weeks? The statement in bold could have just as easily been made by the late Joseph Goebbels in resurrected form, The second in bold does reflect reality, which is it, Jack?: UPDATE 3-Fed's Guynn: change in "language" may be soon-WSJ Wed Feb 9, 2005 11:30 AM ET NEW YORK, Feb 9 (Reuters) - The Federal Reserve still has "got a ways to go" on raising interest rates but may need to change the language in its policy statement, Federal Reserve Bank of Atlanta President Jack Guynn is quoted as saying in an article in The Wall Street Journal Online on Wednesday. Guynn also is quoted as saying the Fed may have to change the language of its statement "not too far down the road," and says the language change could include dropping the words "measured" and "accommodative." The language change may come sooner or later, "and maybe sooner," Guynn is quoted as saying. "You can imagine not too far down the road where some things in the statement aren't going to be appropriate," Guynn is quoted as saying. "And we need to decide how and when to change some of that wording." "If we stay on the path we're on and withdraw some of the accommodation we've had in place ... we'll be at a point it's not quite as clear how much more we need to do and how quickly we need to do it," said Guynn. Financial markets varied in their response to the interview. Short-dated U.S. Treasury debt bounced on Wednesday in reaction to the article as some investors interpreted the comments to mean the central bank may pause in raising rates in the not too distant future. "This is a dovish comment for Guynn," said James Glassman, senior economist at JPMorgan, noting Guynn had a reputation as an inflation hawk. "Now, Guynn does not speak for the whole Fed, but if the most hawkish members of the committee are talking like this then the center of gravity at the Fed may be shifting," said Glassman. Many in the bond market took the comments to mean the Fed may hike rates at the next one or two meetings -- which is already fully priced into futures -- and then pause. As a result, Eurodollar futures (0#ED:: Quote, Profile, Research) trimmed expectations for how high rates may rise later in the year. Short-term Treasuries also firmed, though gains were limited given investors still expected a couple more Fed hikes. Yields on two-year notes (US2YT=RR: Quote, Profile, Research) dipped to 3.29 percent from 3.32 percent late Tuesday. However, dollar traders interpreted the comments differently, with some players expecting that talk of removing the word "measured" from Fed language may mean the central bank could soon pick up its pace of rate tightening. The dollar traded slightly lower late Wednesday morning. Guynn was also quoted as saying that the recent fall in long-term interest rates may reflect the "enormous liquidity out there." The liquidity, he is quoted as saying, is "causing people to ... engage in some speculative kinds of behavior." "I see it in some pockets of Florida, clearly speculative activity in real estate. My hunch is it's people who have money that they're not sure what else to do with ... the narrower risk spreads we see in financial markets suggest people are looking hard for return. The most important question to ask is: what if those rates behave differently going forward?" Although Guynn is not a full-time voting member of the Fed this year, he will vote as an alternate at the Federal Open Market Committee meeting on March 22, when the central bank is widely expected to raise official interest rates by 0.25 percentage point to 2.75 percent. Guynn also voted as an alternate at the FOMC meeting earlier this month. He is filling in before Richard Fisher assumes the presidency of the Dallas Fed on April 4.

To: mishedlo who wrote (23237)	2/9/2005 1:48:44 PM
From: CalculatedRisk	Read Replies (3) \| Respond to of 116555

Pause in buying of treasuries? Maybe Japan slowed down, but the foreign purchases have continued ... Treasuries held abroad (% of total): Year end 2000 33.8% 2001 35.2% 2002 38.4% 2003 41.1% 2004 46.9% SOURCE: stern.nyu.edu Over the last 3 years, foreign purchases of treasuries has been 113% of all new treasuries issued! (They have bought all new securities and then some).

To: mishedlo who wrote (23237)	2/9/2005 2:15:19 PM
From: russwinter	Respond to of 116555

This data is through November, and even if the Japanese were MIA other CBs were fairly active. Even more important were this cluster of coupon passes, who needs Japan with this going on?. 10-20 2.390 11-2 1.203 11-3 421 11-15 1.198 11-18 1.251 11-29 1.248 12-1 1.307 12-2 1.097 12-7 1.500 12-8 425 And Fed debt monetizing: 10-20 1.059 10-27 2.504 11-3 1.858 11-10 1.800 11-17 445 11-24 1.996 12-1 704 12-8 3.650 12-15 1.971 <Obviously there was sufficient buying pressure outside of Japan to support treasuries> Yes, massive running for cover by offside speculators caused by a brief period when the Wizards (Uncle Ernie)have refrained from fooling around with children. We will soon enough see how premanent this is. As much as I'm chomping at the bits to get short bonds, you sure didn't see RW stepping in front of these wild men did you? I posted that more than once too. Never underestimate the ability of funds to distort and disrupt (both ways) any market in the short run or even intermediate run (up to a couple months). The true test of the USD, oil, gold, and bonds will now come as these clowns get neutral or even on the other side of the trade, combined with the return of Uncle Ernie.