The government giveth, and taketh.
Taketh was front and center in October 2001, when the Treasury pulled the long bond from active duty. Yesterday, the 30-year Treasury was called back into active duty, with the first issue up for auction on August 8 at 1:00 pm New York time, according to yesterday’s statement from the Treasury. (Step right up, and no pushing—everyone will have a chance to lend money to Uncle Sam.)
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SAFE AT ANY PRICE?
In the new world order du jour, oil’s comfortably north of $60 a barrel, inflation’s running at a modest annualized 2.5%, the 10-year Treasury Note yields roughly 4.3%, and the economy’s advancing by an inflation-adjusted 3.4% a year at last count. To jump to the punch line: the much-feared fallout from a bull market in oil is a no-show.
SLEEPLESS IN RIYADH
Oil reached a new record high yesterday in New York–$62.30 a barrel—on news that Saudi Arabia’s King Fahd died. The news wasn’t exactly a surprise (the king had been ailing for 10 years), nor did it set off a power struggle (Crown Prince Abdullah, who has been the kingdom’s defacto ruler for a decade following the king’s debilitating stroke in 1995, assumed control). But today’s stability masks the potential for unrest in the not-too-distant future.
TEN MINUS TWO EQUALS…???
Wall Street likes to keep an eye on the spread between the 10-year Treasury Note and its two-year counterpart. This particular view of the money curve has been delivering more than a little bit of drama lately, but whether that translates into clarity about the future is another matter entirely.
THE SONG REMAINS THE SAME
So, now what?
Today’s 3.4% advance estimate of second-quarter gross domestic product arrived a touch short of the 3.5% forecast that the dismal-science consensus called for, and landed even further astray of the 3.8% pace registered in the first quarter. But today’s GDP report wasn’t weak enough for the bond market, which quickly interpreted this morning’s data as being more of the same, namely, the continuation of an economic expansion that’s been rolling along.
M IS FOR MOMENTUM
The government’s first crack at second-quarter GDP hits the streets tomorrow. The crowd’s looking for an inflation-adjusted annualized rise of 3.5% in the U.S. economy for April through June, according to The Street.com. If so, that would be slower than the 3.8% posted in the first quarter. What are the chances that the pace of second-quarter economic growth surprises on the upside? Something more than zero, to judge by recent measures of the economy’s pulse.
THE EARNINGS TRAIN CHUGS ALONG
The stock market in July has been setting new highs in the post-crash era. The S&P 500 for a time on Monday traded over 1238, the highest since mid-2001, and yesterday closed nearby that level at 1231.16. Yes, equity prices generally are still a long way from the glory days before the tech bubble burst. The close of 1527.46 set on March 24, 2000 still stands as the all-time high for the S&P 500, or roughly one-quarter higher than yesterday’s close.
BODMAN’S CLARITY
Government leaders so rarely speak directly that when they do embrace clarity it’s a striking pose. And a sign of the times.
DISSECTING THE MANAGED FLOAT
The People’s Bank of China announced yesterday the release of its currency from the chains of its former peg. Or, to be precise, the yuan will ebb and flow as defined by a managed float administered by its central bank master. Think of it as a cross between a peg and a true float: a little of each and something less than either.
DISSING THE GOLD STANDARD
In case you hadn’t heard, gold’s historical role as a monetary medium is no longer relevant. That’s the message from Federal Reserve Chairman Alan Greenspan, who suggested as much yesterday during testimony to Congress, which is expected to be his last in an official capacity before his term as a Fed governor expires in January.