by Rod Gonzalez
Treasury prices rose on Monday as the equity markets lost ground on economic concerns. Investors’ already thin confidence was shaken once more when CitiGroup announced yesterday that it was cutting its workforce by 53,000. On a positive note for the day, the Industrial Production Report (which measures the change in production of factories, mines and utilities) was released with better than expected results; a 1.30% gain, for the month of October. This stronger than average reading (the 10-year average is 0.20%). All eyes however, were focused on Citi’s announcement as a clear indication that the economic slowdown will only continue to affect companies across various industries. By the end of the day, the 10-year benchmark Treasury had gained 23/32s to yield 3.65% while the 30-year bond closed 20/32s higher to yield 4.19%. The Dow Jones lost 223 points to be at 8,273.
Treasury prices are reacting to this morning’s economic releases as the latest report on the Producer Price Index revealed a much lower than expected reading. Demand for intermediate and long Treasuries, which are susceptible to inflationary expectations, is up as a lower than expected PPI may signal lower inflation and therefore less erosion in the value of these maturities. The 10-year Treasury is currently up 9/32s to yield 3.61% and the 30-year has gained 17/32s so far to yield 4.16%. The Producer Price Index (PPI), which measures the change in prices received by domestic producers in all stages of processing (crude, intermediate materials and finished goods), plunged by the most on record in October, -2.80%, vs. the expected -1.90%. A significant factor for this drop was a -24.90% change in gasoline prices (still reporting a 3.30% gain YoY). Core PPI, which excludes the volatile food and energy sectors rose 0.40% for the month; analysts were expecting this number to be 0.10%. The core PPI year-over-year was also higher than expected at 4.40% versus the estimated 4.00%. This sharp decrease in the monthly PPI report can be attributed to a weakening demand for food and energy as a result of the economic slowdown.
On other important news, market participants will pay close attention to the testimony from Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and FDIC Chair Sheila Bair before the House Financial Services Committee that began at 8:30 a.m. CST. Their comments will focus on the revisions made to the $700 billion TARP rescue package and lending facilities along with the impact on the economy. Treasury Secretary Henry Paulson announced his intention to leave the remaining $410 billion of the $700 billion TARP program to his successor on Monday evening.
Treasury prices are reacting to this morning’s economic releases as the latest report on the Producer Price Index revealed a much lower than expected reading. Demand for intermediate and long Treasuries, which are susceptible to inflationary expectations, is up as a lower than expected PPI may signal lower inflation and therefore less erosion in the value of these maturities. The 10-year Treasury is currently up 9/32s to yield 3.61% and the 30-year has gained 17/32s so far to yield 4.16%. The Producer Price Index (PPI), which measures the change in prices received by domestic producers in all stages of processing (crude, intermediate materials and finished goods), plunged by the most on record in October, -2.80%, vs. the expected -1.90%. A significant factor for this drop was a -24.90% change in gasoline prices (still reporting a 3.30% gain YoY). Core PPI, which excludes the volatile food and energy sectors rose 0.40% for the month; analysts were expecting this number to be 0.10%. The core PPI year-over-year was also higher than expected at 4.40% versus the estimated 4.00%. This sharp decrease in the monthly PPI report can be attributed to a weakening demand for food and energy as a result of the economic slowdown.
On other important news, market participants will pay close attention to the testimony from Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and FDIC Chair Sheila Bair before the House Financial Services Committee that began at 8:30 a.m. CST. Their comments will focus on the revisions made to the $700 billion TARP rescue package and lending facilities along with the impact on the economy. Treasury Secretary Henry Paulson announced his intention to leave the remaining $410 billion of the $700 billion TARP program to his successor on Monday evening.
1 comment:
All the while, the financial media persisted with stories of an economic recovery. EWI analysts offer an independent perspective. Best PPI Claims Service
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