FOMC & 2 year auction
$18B 2 year note auction: A strong bid-to-cover 3.04. The percentage of indirect bidders was high at 52.2%. The high yield was 4.83%.
FOMC Statement: AUTHORIZATION FOR DOMESTIC OPEN MARKET OPERATIONS was amended. AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS was reaffirmed.
Full verbiage is included in the statement. Open Market Operations can be monitored here.
Quotes and paraphrases: A Q4 surge in net exports and a pickup in defense spending are expected to prove largely transitory... The decline in residential construction continued to weigh on overall activity...
Outlays for business fixed investment softened... a spike in energy prices lifted total consumer price inflation... payrolls rose, driven by further gains in the service producing sectors.
Employment in the manufacturing and construction industries declined further... Motor vehicle output turned up, but remained low compared with earlier in the year as vehicle makers continued their efforts to pare inventories.
Although house-price appreciation appeared to have slowed further, robust gains in equity prices likely resulted in a small rise in the ratio of household wealth.
Residential construction activity remained quite weak late last year... Inventories of unsold homes remained considerable...
Real investment in equipment and software fell... Business outlays on transportation equipment, a volatile spending category, dropped considerably. Sales of light vehicles to business customers declined to their lowest level in two years.
Outside of the transportation and high-tech sectors, real spending declined last quarter. That weakness appeared to be concentrated in equipment related to construction and motor vehicle manufacturing.
Business inventories remained elevated... relatively high ratios of inventories to sales appeared to be associated in part with developments in the homebuilding and motor vehicle sectors, some indications of inventory imbalances in other sectors had recently become evident.
A pickup in merger-related borrowing appeared to boost business debt, and a sharp rise in the issuance of bonds and commercial paper more than offset a moderation in bank loans.
In the household sector, the ongoing deceleration in house prices further restrained the growth of home mortgage debt. M2 continued to expand briskly...
A REALLY BAD ASSUMPTION... However, with the contraction in housing activity expected to abate this year... the pace of economic growth was anticipated to edge back up... by the end of 2007.
To date, weakness in the housing market had not appeared to have spilled over to aggregate consumption, although some such effect could not be ruled out as the growth in households' home equity slowed.
BACKPEDDLING... The ongoing contraction in the housing sector and the potential for spillovers to other sectors remained notable downside risks to economic activity...
AND ANOTHER ONE... going forward, favorable financial conditions, strong corporate balance sheets, high profitability, and growth in sales would support a firming of investment spending.
The recent slackness in manufacturing activity appeared to be largely an inventory correction, which participants expected would be completed this year.
AN INVENTORY CORRECTION, THATS WHAT THEY CALL IT THESE DAYS??? OH BOY...
FOMC Statement: AUTHORIZATION FOR DOMESTIC OPEN MARKET OPERATIONS was amended. AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS was reaffirmed.
Full verbiage is included in the statement. Open Market Operations can be monitored here.
Quotes and paraphrases: A Q4 surge in net exports and a pickup in defense spending are expected to prove largely transitory... The decline in residential construction continued to weigh on overall activity...
Outlays for business fixed investment softened... a spike in energy prices lifted total consumer price inflation... payrolls rose, driven by further gains in the service producing sectors.
Employment in the manufacturing and construction industries declined further... Motor vehicle output turned up, but remained low compared with earlier in the year as vehicle makers continued their efforts to pare inventories.
Although house-price appreciation appeared to have slowed further, robust gains in equity prices likely resulted in a small rise in the ratio of household wealth.
Residential construction activity remained quite weak late last year... Inventories of unsold homes remained considerable...
Real investment in equipment and software fell... Business outlays on transportation equipment, a volatile spending category, dropped considerably. Sales of light vehicles to business customers declined to their lowest level in two years.
Outside of the transportation and high-tech sectors, real spending declined last quarter. That weakness appeared to be concentrated in equipment related to construction and motor vehicle manufacturing.
Business inventories remained elevated... relatively high ratios of inventories to sales appeared to be associated in part with developments in the homebuilding and motor vehicle sectors, some indications of inventory imbalances in other sectors had recently become evident.
A pickup in merger-related borrowing appeared to boost business debt, and a sharp rise in the issuance of bonds and commercial paper more than offset a moderation in bank loans.
In the household sector, the ongoing deceleration in house prices further restrained the growth of home mortgage debt. M2 continued to expand briskly...
A REALLY BAD ASSUMPTION... However, with the contraction in housing activity expected to abate this year... the pace of economic growth was anticipated to edge back up... by the end of 2007.
To date, weakness in the housing market had not appeared to have spilled over to aggregate consumption, although some such effect could not be ruled out as the growth in households' home equity slowed.
BACKPEDDLING... The ongoing contraction in the housing sector and the potential for spillovers to other sectors remained notable downside risks to economic activity...
AND ANOTHER ONE... going forward, favorable financial conditions, strong corporate balance sheets, high profitability, and growth in sales would support a firming of investment spending.
The recent slackness in manufacturing activity appeared to be largely an inventory correction, which participants expected would be completed this year.
AN INVENTORY CORRECTION, THATS WHAT THEY CALL IT THESE DAYS??? OH BOY...
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