NewsMine — economy — united-states — 2005 — 2005-apr-july — Viewing Item

Durable goods orders fall by most in 2 years Original Source Link: (May no longer be active)    http://quote.bloomberg.com/apps/news?pid=10000006&sid=adtg0mEjO6YM&refer=home http://quote.bloomberg.com/apps/news?pid=10000006&sid=adtg0mEjO6YM&refer=home Treasuries Rise; Durables Orders Have Biggest Drop in Two Years April 27 (Bloomberg) -- U.S. Treasury notes rose after the government reported durable goods orders fell in March by the most in more than two years, a sign the U.S. economy is slowing. Slower growth may lead the Federal Reserve to ease the pace of interest rate increases, boosting demand for bonds. The yield on the 10-year note, which moves opposite to prices, dropped almost half a percentage point since March 22, when policy makers increased the benchmark lending rate to 2.75 percent. ``The risk is yields will continue to fall near term because the data is deteriorating,'' said Dominic Konstam, head of interest-rate strategy at Credit Suisse First Boston Inc. in New York, one of the 22 primary U.S. government securities dealers that trade with the Federal Reserve New York branch. ``It is a concern that what we're seeing now is the beginning of a protracted slowdown.'' The 4 percent note maturing in February 2015 rose 7/16, or $4.38 per $1,000 face amount, to 98 5/16 as of 10:30 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The yield fell 4 basis points, or 0.4 percent point, to 4.21 percent. Durables orders unexpectedly fell 2.8 percent last month, the Commerce Department said today. Forecasts called for an increase. The U.S. economy probably grew 3.5 percent in the first quarter, slowing from a 3.8 percent pace in the previous three months, according to the median estimate of 82 economists in a Bloomberg survey. The Commerce Department reports quarterly gross domestic product tomorrow. `Entering a Slowdown' ``The economy appears to be entering a period of a slowdown,'' said John Miller, a fund manager at Nuveen Investments, which oversees $56 billion of bonds. ``This particular data really reinforces the tone that we have been experiencing over the last three to four weeks in the Treasury market.'' A monthly index of manufacturing in the Chicago area is expected to fall to 62.5 in April from 69.2 percent in March, according to the median estimate. The Purchasing Managers Association of Chicago will issue its index April 29. A reading above 50 signals expansion. The Institute for Supply Management may report on May 2 its National factory index fell to 55 in April from 55.2 in March, the fifth month of declines, a separate survey shows. John Herrmann, chief U.S. economist at Cantor Fitzgerald LP, said in an email that he is lowering his forecast of economic growth for the first quarter to 3.2 percent from 3.4 percent as a result of the March durable goods report. ``The Fed needs to be very careful in raising rates,'' said CSFB's Konstam. ``They may have to pause.'' Rate Expectations Expectations about the level of U.S. interest rates at the end of the year fell today after the report. The yield on the December futures contract was 3.92 percent today, down from 3.98 percent and from this year highest, 4.34 percent, reached March 28. The contracts settle at a three-month lending rate that averaged 21 basis points higher than the Fed's target over the past decade. The 3 3/4 percent note maturing in 2007, the most sensitive to changes in benchmark interest rates, had its biggest one day- gain in more than 10 days, rising about 3/32. The yield fell basis points to 3.59 percent. ``The two biggest risks to the longer parts of the Treasury yield curve are higher inflation and short rates moving higher,'' said Nuveen's Miller. ``Both risks may prove to be mitigated, which should be bullish for that part of the curve.'' Fed policy makers raised the target for overnight bank lending by a quarter percentage point to 2.75 percent at their last meeting on March 22 and stuck to a ``measured'' stance on future increases. They are expected to raise again on May 3, to 3 percent, according to all 81 economists in a Bloomberg News survey. It will be the eighth Fed increase since June. The European Central Bank has kept its key interest rate at 2 percent since June 2003. Debt Auction Konstam said his firm's trading desk has been reducing short positions in Treasuries in the last couple of weeks in response to weaker U.S. economic data. Gains in Treasuries may be limited as the government plans to auction $24 billion of two-year notes today. The Treasury yesterday sold $9 billion of five-year Treasury Inflation- Protected Securities, or TIPS, at a 1.2 percent yield. Today's declines in durable goods orders followed a report yesterday showing new-home sales surged to a record pace. New- home sales rose to a 1.431 million annual rate in March, the Commerce Department said. Last Updated: April 27, 2005 10:45 EDT

120 thousand united airline employees lose pensions { May 11 2005 } American obesity sending health costs soaring Consumer prices rise greater than expected Dow has biggest 2 day drop in two years Durable goods orders fall by most in 2 years Economy drags heels and inflations fears rise { April 29 2005 } Fed raises key rate on inflation fears { May 3 2005 } Fed raises rates to 3 and half as measured plan Fed says inflation pressures could be intesnifying { April 12 2005 } General motors shifts engineer positions to brazil { June 29 2005 } General motors to cut 25 thousand jobs { June 8 2005 } Greenspan says fed will keep raising rates Greenspan will keep raising rates he says Housing prices loom as concern { July 20 2005 } Huggies cuts six thousand jobs Industry squeezed by soaring energy prices { June 26 2005 } Kodak lays off 10 thousand workers { July 20 2005 } London blasts help dollar and stock gains Manufacturing slow down boosted stocks they say Manufacturing weakest since 2003 { June 1 2005 } Massachusetts homes sales plunge 11 percent { June 24 2005 } Real wages falling at fastest rate in 14 years { May 10 2005 } Sales of homes hit record as prices soar { May 24 2005 } Snow says oil prices hurting economy { June 28 2005 } States costs soar under drivers license law Stocks continue april decline hitting 2005 lows Stocks fall amid oil price worries { June 21 2005 } Stocks head lower on surging oil Stocks rise on jump in oil prices { June 17 2005 } Student loan interest will double Trade deficit unexpectedly shrank to 55b Trade gap widens more than expected US stocks fall as IBM earnings drag tech shares down US tourism losing billions because of image { May 8 2005 } Wages lagging behind inflation { April 11 2005 } Weak consumer spending damps speculation of quickening inflation Files Listed: 36

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