Tuesday, December 16, 2008

TREASURIES-30Y yield hits record low after big CPI decline

From Reuters:
The yield on U.S. 30-year Treasury bonds fell to a record low after a record drop in the U.S. Consumer Price Index in November spurred expectations of deflation and bids for long-dated debt....
From Bloomberg:

U.S. Consumer Prices Fall 1.7%; Core Rate Unchanged
The cost of living in the U.S. fell in November by the most on record as gasoline and other energy prices plunged.

Consumer prices dropped 1.7 percent last month, more than economists had forecast, a Labor Department report showed today in Washington. Excluding food and energy, so-called core prices were unchanged from a month earlier.

Costs of oil and other raw materials plummeted last month as a credit crisis intensified, forcing consumers to slash spending and prompting U.S. automakers to ask for a federal rescue package. Tumbling sales have retailers cutting prices, bolstering economists’ expectations the Federal Reserve later today will cut its target rate to the lowest level ever.

“The prospect of the longest recession in over 50 years and evidence that overall inflation is moderating should persuade the Fed to take all actions necessary to keep credit flowing and to mitigate the economic downturn,” Dana Saporta, an economist at Dresdner Kleinwort in New York, said before the report.

A separate government report today showed that builders broke ground on the fewest new homes since record-keeping began in 1959. Housing starts fell 18.9 percent in November to an annual rate of 625,000, the Commerce Department said.

Treasuries, Stocks

Treasuries, which had risen earlier in the day, remained higher after the reports. Benchmark 10-year note yields fell to 2.50 percent at 8:36 a.m. in New York, from 2.51 percent late yesterday. Futures contracts on the Standard & Poor’s 500 Stock Index advanced ahead of today’s Fed meeting, gaining 0.7 percent to 878.50....MORE