Fed Chairman Alan Greenspan merely revisited territory he had already staked out in his latest public remarks today, and the Treasury market took them in stride.
speech at Boston College, Greenspan reiterated the warning he issued in his Feb. 17
testimony: That the
Federal Open Market Committee
is on a rate-hiking mission that will last till the economy stops displaying signs that it is growing at an unsustainable pace.
Greenspan said: "Until market forces, assisted by a vigilant Federal Reserve, effect the necessary alignment of the growth of aggregate demand with the growth of potential aggregate supply, the full benefits of innovative productivity acceleration are at risk of being undermined by financial and economic instability."
(In the Humphrey-Hawkins testimony last week, the Fed chairman said: "
With the assistance of a monetary policy vigilant against emerging macroeconomic imbalances, real long-term rates will at some point be high enough to finally balance demand with supply at the economy's potential in both the financial and product markets.")
In the speech, entitled "The revolution in information technology," Greenspan drew heavily on previous speeches, as he often does. His discussion of the ways in which computers and the Internet have vastly improved the productivity of American companies was well-worn, having appeared most recently in
testimony before the congressional
Joint Economic Committee
on June 14. And his discussion of how rising productivity has a dark side, encouraging consumer spending in excess of what the economy can currently produce, was taken word for word from his Humphrey-Hawkins testimony.
And so, the Treasury market barely reacted to Greenspan. It sustained early losses triggered by weekend comments by Fed Governor
, and then pared them as the day wore on and the stock market sold off.
Meyer, the second-most influential
Fed official after Greenspan, talked tough at a conference at San Franciso Friday evening. In a
speech to a group of economists, large portions of which are totally incomprehensible to the layperson, Meyer advocated an aggressive approach to curbing economic growth.
"A final component of
the Fed's monetary policy strategy should be that policy should tighten further -- above and beyond what is presumed to be necessary to slow the economy to trend -- to the extent that efforts to stabilize the output gap fall short," he said. In other words, if the Fed doesn't succeed in stabilizing the unemployment rate, which sits near a 30-year low, it should keep hiking, even if the economic growth rate has moderated.
Early in the session, the expectation that any day now, the Treasury Department will announce the details of its plan to buy some Treasury securities back from investors prevented even bigger losses,
Dresdner Kleinwort Benson
senior economist Kevin Logan said. "People are finding it hard to be short in this market," he said.
The buyback program is one of the ways the government is dealing with the fact that because it is running a surplus, it no longer needs to have so much debt outstanding. So far, Treasury officials have said that they will buy back up to $30 billion of securities this year in increments of $1 billion, and that they will start during the first quarter. The market is awaiting information on which securities they want, and when.
After trading down as much as 13/32, the benchmark 10-year Treasury ended down 7/32 at 100 21/32, lifting its yield 3 basis points to 6.409%. The erstwhile benchmark 30-year Treasury bond, whose value has been inflated by the presumption that long-maturity issues will be buyback targets, fell 6/32 to 101 14/32, lifting its yield 1.4 basis points to 6.144%.
Chicago Board of Trade
, the June
Treasury futures contract fell 12/32 to 94 27/32.
There were no economic releases today, and apart from tomorrow's revision to the fourth-quarter
productivity and unit labor costs
report, there is nothing major this week.
Currency and Commodities
The dollar weakened against the yen and gained against the euro. It lately was worth 107.48 yen, down from 107.76 Friday. The euro was worth $0.9591, down from $0.9597 Friday. For more on currencies, please take a look at
Currency Watch column.
Crude oil for April delivery at the
New York Mercantile Exchange
rose to a new multi-year high of $32.18 a barrel from $31.51 Friday.
Bridge Commodity Research Bureau Index
rose to 214.44 from 213.56 Friday.
Gold for April delivery at the
fell to $289.40 an ounce from $290.30 Friday.