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Tuesday: Greenspan on the Hill

A Manic Monday it was not. With the bond market closed and no economic data released today, most economists and fixed-income traders extended their weekend into a three-day vacation.

Tomorrow, however, everything is expected to return to normal. Of course normal in this bond market means ulcers galore. The pack of fixed-income animals will track every utterance from

Fed Chairman Alan Greenspan

as he speaks to the Senate Budget Committee. Rhetorical flourishes will be closely watched.

Expectations that fourth-quarter GDP growth will come in at close to 3%, as opposed to initial estimates of 1.5%, have some financial strategists concerned that the Fed will feel compelled to tighten monetary policy at its February meeting. Right now, however, consensus expectations call for no Fed move.

Greenspan might use the appearance on Capitol Hill to soften the markets for any move that might be forthcoming, says Frazier Evans, a senior economist with

Colonial Investment Services

in Boston.

Evans is unsure whether a move is necessary right now since the growth in GDP resulted from a 10% increase in exports as well as large gains in construction and capital spending. Those gains mark "healthy growth," rather than excessive growth, Evans says.

To bolster his contention, he points to sluggish retail numbers and inconsistent consumer spending.

Tuesday's numbers:

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Greenspan Speech

(10:00 AM EST): Fed Chairman Alan Greenspan testifies before the Senate Budget Committee on the state of the U.S. economy.

LJR Redbook Retail

(2:55 PM EST): The weekly update of how many Gap sweaters and Sears toasters were bought during the previous week will be closely watched on a quiet afternoon.

Parry Speech

(4:00 PM EST): San Francisco Federal Reserve Bank President Robert T. Parry will speak at a financial conference in San Francisco.

Treasury Auction

(1:00 PM EST): The Treasury will offer $23 billion in three- and six-month T-bills to the highest bidders; $27.2 billion in maturing bills will also be on the block.

Treasury Announcement

(2:30 PM EST): A date will be set for the much-anticipated inflation-indexed ten-year note auctions; $6 billion worth is expected to be sold.

By Avi Stieglitz