EFFECTIVE 5:00 PM EASTERN TIME: 11/13/97 /_________________\
KEY INDICATOR CURRENT CHANGE FROM LAST YIELD |6-Mth CD :5.72% *|
--------------- --------- ---------------- ------ |11th COFI:4.941% |
3-month T-Bill: 5.12 - unchanged -5.26% |6Mo-LIBOR:5.805% |
10 Year T-Note: 102 01/34 - unchanged -5.85% |1Yr TBill:5.44% *|
Long Bond.....: 100 12/32 - up 2/32 -6.10% |3Yr TBill:5.77% *|
Dow Jones.....: 7487.76 - up 86.44 |5Yr TBill:5.81% *|
FHLMC 60 day..: 7.38% - up from 7.36% (11/12) |10YrTBill:5.92% *|
FNMA 60 day...: 7.33% - down from 7.34% (11/12) |30YrTBond:6.20% *|
|PRIME - 8.500%|
Todays Interest Rate/Loan Fee Pricing Trend: |DISCOUNT - 5.000%|
*** STABLE *** |FED FUNDS- 5.50 |
================ |_________________|
* Wkly Average ending 11/07
Greenspan's testimony this morning on Asian markets had little market impact since most of the prepared testimony was just a rehash of his Oct 29 testimony. Greenspan repeated his line -- the impact of the Asian crisis on the US will be "modest, but not negligible."
Tomorrow's potential market moving reports include the the October Producer Price Index (PPI) (+0.1% forecast) and October Retail Sales (+0.3% forecast).
The Labor Department reported this morning that workplace productivity -- the key to Americans' living standards -- shot up 4.5% at an annual rate during the July-September quarter, fastest in more than five years. At the same time, unit labor costs -- typically two-thirds of a product's price -- fell at a 0.3% rate. It was the first decline since April-June 1994, indicating little inflationary pressure. Year/year unit labor costs are now down to 1.3% from a first quarter peak of 2.7%.
The increase in nonfarm productivity -- output per number of hours worked -- was nearly double the revised 2.4% advance during the April-June quarter. Many analysts had expected only 3% annualized growth. The second quarter increase earlier was estimated to be 2.7%.
The strong back-to-back productivity reports added support to the "new age" theory -- that huge investments in computers and other high-tech equipment have put the economy on the threshold of what Federal Reserve Chairman Alan Greenspan has said would be a "once or twice in a century" leap in productivity.
If so, it would explain why inflation has remained under wraps despite an economic expansion now in its seventh year and the lowest unemployment rate in nearly a quarter-century.
Also reported this morning, the Labor Department said that Initial Jobless Claims fell by 6,000 last week to total a seasonally adjusted 310,000 - right in line with market expectations. It was the 10th straight week that claims totaled less than 320,000, a level that analysts say is a sign of continuing payroll growth. The four-week moving average inched up to 309,250 from 308,500. It was the highest since 312,750 during the period ended Sept. 20.
Also reported this morning, the MBA's mortgage applications index for new home purchases continued its recent volatility with a sharp decline to 202.1 after a sharp increase to 233.9 in the prior week.
Just when the Treasury market looked like it was hitting a ceiling, another sell-off in stocks helped bonds climb yet higher yesterday, sending the yield on the benchmark 30-year bond to its lowest levels since early 1996. In late trading, the bellwether 30-year bond was up 19/32, lowering its yield to 6.10%, its lowest level since Feb. 14, 1996.
Treasurys managed only meager gains during much of the day's activity. But bonds surged in afternoon trading, as skittish stock investors again shifted into Treasurys in search of safety amid world-wide stock weakness that helped send the Dow Jones Industrial Average down 157.41 points.
Almost lost in the day's activity was the decision by the Federal Reserve's policymaking committee to leave interest rates unchanged. The decision was widely expected on Wall Street, and had little impact on Wednesday's trading, market participants said.
The Fed's decision to leave the federal-funds rate at 5.50% gave Treasurys only a very brief boost.
Traders cited a sell-off in Brazilian stocks and continuing weakness in emerging-market debt to explain continuing interest from emerging-market investors in Treasury securities. Traders dismissed concern that Asian weakness will encourage Japanese investors to repatriate their investments in the U.S. market.
The market's fundamentals are also strong. Economists argue that the Asian crises will likely help U.S. bonds by slowing down the world economy, reducing any potential uptick in inflation....