EFFECTIVE 5:00 PM EASTERN TIME: 11/03/97 /_________________\
KEY INDICATOR CURRENT CHANGE FROM LAST YIELD |6-Mth CD :5.77% *|
--------------- --------- ---------------- ------ |11th COFI:4.904% |
3-month T-Bill: 5.09 - up 3 basis pnts-5.22% |6Mo-LIBOR:5.852% |
10 Year T-Note: 101 12032 - down 17/32 -5.90% |1Yr TBill:5.53% *|
Long Bond.....: 102 08/32 - down 24/32 -6.21% |3Yr TBill:5.93% *|
Dow Jones.....: 7674.40 - up 232.32 |5Yr TBill:6.02% *|
FHLMC 60 day..: 7.38% - up from 7.33% (10/31) |10YrTBill:6.09% *|
FNMA 60 day...: 7.34% - up from 7.27% (10/31) |30YrTBond:6.38% *|
|PRIME - 8.500%|
Todays Interest Rate/Loan Fee Pricing Trend: |DISCOUNT - 5.000%|
*** UP/STABLE *** |FED FUNDS- 5.50 |
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* Wkly Average ending 10/24
The Dow Jones Industrial Average (DJIA) was up as much as 150 points while the main 30-Year Bond was down nearly a full point in early trading.
If the Bond market can get away from tracking the stock market this week, it is packed with potential market moving reports and events. There is at least one major report each day of the week, starting with the National Association of Purchasing Managers (NAPM) report today and ending with the employment report on Friday. (Check the calendar for details).
But bond investors, who usually hunger for such information, may pay little heed. Instead, they could spend another week worrying about far-flung economies in Asia and Latin America and watching U.S. stock trading.
Concerns about those regions and wild swings in stocks last week at times sent investors fleeing to the perceived safety of U.S. Treasurys. If uncertainty still looms, that will steal attention from domestic news that usually captivates the bond market -- such as the Labor Department's monthly jobs report this Friday.
In another key event, the Treasury this week is scheduled to sell $35 billion in new notes and bonds in its quarterly refunding. That will include $14 billion in 3-Year Notes Tuesday, $11 billion in 10-Year Notes Wednesday and $10 billion in 30-Year Bonds on Thursday.
The National Association of Purchasing Managers (NAPM) reported this morning that the economy's manufacturing sector grew at a faster clip in October despite expectations that the numbers would show a cooling economy. It's overall index rose to 56.0% from 54.2%. The price index rose to 55.9% from 54.7%, which will keep inflation fears alive.
Both the orders and production indexes rose sharply, indicating that the relatively low September NAPM reading was an aberration. Given continued strength in orders and relatively low manufacturing inventories, the manufacturing sector should remain strong going forward.
At an average of 55.3% from January-October, the index points to GDP growth of 4.0%, which looks to be right on the mark. At October's reading of 56.0%, the index points to even stronger growth of 4.2%.
Also reported this morning, the Commerce Department said that Personal Income rose 0.4% and Personal Spending increased 0.2% in September - the market had forecast 0.4% and 0.3% respectively. Income had risen 0.6% in August while Spending had risen 0.3% in August and 1.1% in July.
Lastly reported this morning, the Commerce Department said that Construction Spending fell 1.1% to a seasonally adjusted annual rate of $595.8 billion after holding steady a month earlier. It was the largest decrease since December. Declines in commercial and government construction more than offset an increase in housing. The weakness was led by a 5.1% drop in commercial spending, the largest since January 1994.
Residential construction shot up 1%. Advances in single-family construction and remodeling offset a drop in apartment building.
Friday, the benchmark 30-year Treasury bond fell 7/32, raising its yield to 6.142% from 6.126% late Thursday. Through last week, Treasurys surged whenever stocks plummeted -- and retreated when stocks recovered. Trading for the week hit a record $600 billion.
Meantime, the market ignored Friday's domestic news.
Bonds barely flinched Friday morning when the Commerce Department said Gross Domestic Product (GDP) grew at a 3.5% annual rate in the July-September quarter -- bolstered by a 5.7% jump in consumer spending, the biggest in five years. However, while the overall rate was right in line with expectations, the inflation indicator, the Price Deflator Index, came in at a scant 1.4% - much lower than the 2.0% forecast and the lowest since 1964. The Price Deflator rose at a 2.4% annual rate in the first quarter and 1.8% in the second.
3rd quarter GDP, the sum of all goods and services produced within U.S. borders, was slightly better than the healthy 3.3% rate in the 2nd quarter. Neither period, though, came close to the torrid 4.9% registered during the first three months of the year.
Normally, such rapid growth would raise inflation warning flags and draw interest-rate increases from the Federal Reserve. But analysts believe the stock market's recent sharp decline -- eliminating part of consumers' wealth -- will help slow growth next year to a rate monetary policy makers view as more sustainable....