EFFECTIVE 5:00 PM EASTERN TIME: 11/14/97 /_________________\
KEY INDICATOR CURRENT CHANGE FROM LAST YIELD |6-Mth CD :5.72% *|
--------------- --------- ---------------- ------ |11th COFI:4.941% |
3-month T-Bill: 5.11 - down 1 basis pnt -5.25% |6Mo-LIBOR:5.805% |
10 Year T-Note: 101 28/32 - down 5/32 -5.87% |1Yr TBill:5.44% *|
Long Bond.....: 100 10/32 - down 2/32 -6.10% |3Yr TBill:5.77% *|
Dow Jones.....: 7572.48 - up 84.72 |5Yr TBill:5.81% *|
FHLMC 60 day..: 7.37% - down from 7.38% (11/13) |10YrTBill:5.92% *|
FNMA 60 day...: 7.29% - down from 7.33% (11/13) |30YrTBond:6.20% *|
|PRIME - 8.500%|
Todays Interest Rate/Loan Fee Pricing Trend: |DISCOUNT - 5.000%|
*** DOWN/STABLE *** |FED FUNDS- 5.50 |
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* Wkly Average ending 11/07
Next week's economic calendar includes Industrial Production and Capacity Utlization on Monday, the Consumer Price Index (CPI) on Tuesday, and The Philadelphia Fed Manufacturing Index on Thursday. (See the calendar for details).
The Labor Department reported this morning that the Producer Price Index (PPI) inched just 0.1% higher in October. That follows a sharp 0.5% jump in September and a moderate 0.3% rise in August. The increases came after seven consecutive declines -- a post World War II record. The PPI Core Rate, which excludes the volatile food and energy sectors, was unchanged after a 0.4% jump in September. Both numbers were in-line with market expectations.
The PPI has declined at a 1.2% annual rate for the first 10 months of the year, compared with a 2.8% increase during all of 1996. The year/year changes in total PPI and core PPI are still quite friendly at -0.2% and +0.3%, respectively.
Also reported this morning, the Commerce Department said that Retail Sales fell 0.2% in October following a 0.1% decline in September. Economists had been expecting a 0.3% increase last month, and September had originally been estimated as a 0.3% gain.
However, the the miss was entirely in auto sales which were significantly weaker than expected. Excluding autos, sales increased by 0.4% and was very close to expectations.
Lastly reported this morning, the University of Michigan said that its Consumer Sentiment index rose to 106.1 in early November from a revised 105.6 reading in October (originally 105.2) - the market had forecast a decline to 102.0.
Bond prices gained modestly yesterday on favorable economic data and comments by Federal Reserve officials. In late trading, the price of the benchmark 30-year Treasury bond was up 5/32, lowering its yield to 6.09% from 6.10% late Wednesday. At Thursday's level, the yield of the 30-year maturity was at its lowest since mid-February 1996.
Prices fell early in the New York trading session on profit-taking and as funds flowed back out of bonds after a rebound in overseas equities markets. In recent weeks, bonds have benefited from "flight-to-quailty" buying whenever stock prices have dropped sharply and have retreated whenever stocks have recovered.
But Treasurys then recovered after the Department of Labor said nonfarm business productivity surged 4.5% in the third quarter, the biggest rise since the fourth quarter of 1992. The news bolstered the argument by some economists, including Federal Reserve Chairman Alan Greenspan, that strong productivity gains are helping to contain inflation despite above-trend economic growth.
Later, the market got a further lift from testimony before the House Banking Committee by Mr. Greenspan on financial markets and economic events in Asia.
As in previous remarks, the Fed chairman downplayed the effect of the recent turmoil in Asia on the U.S. economy. He said the impact would be modest, though not negligible. But he added that "there is no reason that above-average growth in countries that are still in a position to gain from catching up with the prevailing technology cannot persist for a very long time."
That, analysts said, suggests that Mr. Greenspan doesn't expect the economic upheaval in Asia to be a prolonged one.
Bond traders and investors also scrutinized comments by Federal Reserve Bank of New York President William McDonough about recent events in Asia and Latin America. During an appearance in New York City, Mr. McDonough said he believed the turbulence in financial markets world-wide is nearer to a close, although it isn't over yet.
The comments by both Mr. Greenspan and Mr. McDonough were unusual in that they came one day after a meeting of Fed policy makers. Typically, Fed officials don't make public remarks in the week before and immediately after meetings of the Fed's Federal Open Market Committee.
Despite the bullish economic data and comments by Fed officials, Treasurys continued to react to the fairly wide swings in U.S. stocks. Treasurys came off earlier highs as stocks rallied in the afternoon. The Dow Jones Industrial Average ended up 86.44 to close at 7487.76....
DATE ECONOMIC REPORT FORECAST ACTUAL ---- ----------------------------- -------- ------ Mon 11/03 Personal Income (Sept) +0.4% +0.4% 11/03 Personal Spending (Sept) +0.3% +0.2% 11/03 Ntl Purch. Mgrs (NAPM)(Oct) 53.6 56.0 11/03 Construction Spending (Sept) +0.6% -1.1% Tue 11/04 Leading Indicators (Sept) +0.2% +0.2% 11/04 Mitsubishi and Johnson Redbook - weekly retail sales 11/04 $14 billion 3-Year Note Auction - - - - - - - - - - Wed 11/05 Factory Orders (Sept) -0.2% +0.4% 11/05 $11 billion 10-Year Note Auction - - - - - - - - - - Thur 11/06 Initial Jobless Claims (11/01) 305,000 315,000 11/06 $10 billion 30-Year Bond Auction - - - - - - - - - - Fri 11/07 Unemployment Rate (Oct) 4.8% 4.7% 11/07 Non-Farm Payrolls (Oct) +215,000 284,000 11/07 Hourly Earnings (Oct) +0.3% +0.5% 11/07 Wholesale Inventories (Sept) +0.4% +1.2% 11/07 Consumer Credit (Sept) +$4.0 Bln 11/07 Greenspan speaks (8:45 EST) - - - - - - - - - -