Hello all, I'll be out of the office next week so I guess this is my last comment for the year. I'll write from Mexico if the economy takes a drastic turn for the better (or worse). Otherwise see you in '09!
By Rod Gonzalez
“The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.” FOMC December 16th Release
Tuesday’s FOMC Statement lingered in the mind of market participants yesterday as they continued to demand long term Treasuries. Investors’ belief that the Fed will now move to try yet another strategy to stabilize the markets and inject cash into the economy (in order to mitigate the potential risk of deflation) pushed yields down on the long end of the curve. In contrast, short and intermediate maturities lost value as investors took some profits off the table. The 2 year bond lost 6/32s to yield 0.74% and the 5 year dropped 12/32s to yield 1.37%. Conversely, the benchmark 10 year bond gained 19/32s to yield 2.19% while the long bond rose over 2 points and 3/32s yielding 2.65%
Treasuries are trading higher this morning as the Initial Jobless Claims report eased from its record level reached the week before. The 10 year Treasury bond is currently trading 1 point and 4/32s higher to yield 2.07% while the 30-year bond has so far gained one point and 9/32s to yield 2.60%. For the record, the Department of Labor released its weekly Jobless Claims report in which claims fell 21,000 in the previous week to 554,000. Continuing claims also dropped 47,000 to 4.384 million. Contrary to the weekly data however, the less volatile 4-week average number of initial claims reported an increase of 3,750 from the reported 541,000 for the previous week. The Initial Jobless Claims number continues to be significant as the Federal Reserve currently has 2 goals in mind: boosting economic growth and mitigating unemployment. Inflationary pressures caused by a relaxed monetary policy are being left aside for now.
In other economic releases for the day, the Leading Economic Indicators, a composite index of ten economic indicators designed to predict economic activity six to nine months in the future, will be released at 9 am CST. This index has only been positive 2 months this year (April and September); this time around analysts are forecasting the index to report a -0.4% change for the month of November, a less than stellar performance. The Philadelphia Fed will also be releasing its index at 9:00 am CST. Analysts are expecting another negative reading for December at -40.5. Finally, Dallas Fed President Richard Fisher will speak at 1:30 pm CST on the economy at an event in Dallas, Texas. While Fisher is a FOMC voting member until Jan. 28, he attended his last meeting this week.
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