CRAWFORD, Aug 17: US President George W. Bush on Friday said he would be announcing new measures to stimulate the flagging US economy, based on ideas emanating from his economic summit in Waco, Texas, earlier this week.
I am going to analyze and think about some of the suggestions, so that when I announce them they’ll be well thought out, they’ll be part of a long-term plan, he told reporters here, where he is enjoying a month-long vacation on his ranch.
There were some interesting ideas, you know, Bush said, noting that among them were moves to make it easier for people to put more money in their 401(k)s quicker and a lot of interesting talk about capital gains taxes (and) double taxation of dividends.
Half of Bush’s cabinet, including Vice President Dick Cheney, as well as some 240 people representing diverse economic sectors, attended the forum Tuesday in Waco, not far from Bush’s “Prairie Chapel” ranch.
Bush warned the US Congress at the forum to control its spending, and reassured Americans that his administration has the nation’s slumping economy under control.
NEW YORK: In a week in which economic news and the Federal Reserve’s economic outlook whipsawed fixed-income debt, plunging some Treasury yields to 40-year lows before they bounced up, US agency debt prices weakened and their yield spreads widened.
Several traders said agencies underperformed Treasuries on Friday as investors drifted instead toward mortgage-backed securities, as prepayment fears ebbed with rising Treasury yields.
The threat of torrid mortgage securities prepayments subsided late in the week, as Treasury 10-year note yields, a pricing peg for many home loan rates, had jumped to 4.32 per cent by late Friday from a 40-year low of 3.96 per cent earlier this week.
When prepayment risks flares, mortgage debt holders tend to buy agencies and Treasuries to temper the cash flow losses that early MBS repayments can trigger.
Otherwise, there was not much activity going on at week’s end, and there were lots of offerings and no one looking to buy, also causing spreads to widen out, said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson in Seattle,
Next week we have very little economic data, so I think (market direction) will be dependent on developing news events, she added.
Many agency yield spreads over Treasuries widened by as much as four to six basis points during the week.
Some of the selling late in the week was profit-taking, after highs reached after the Fed on Tuesday shifted its view toward an economy that risked weakening.
Treasuries slumped on Friday after a key gauge of US consumer sentiment for August slipped less than some had expected, sending 10-year yields above technical levels that fueled selling and helping some stocks gain.
The University of Michigan consumer sentiment index slipped in August to 87.9 from 88.1 in July. Market talk had been circulating before the data were released that the figure would be much weaker.
With many economists looking for the Fed to cut interest rates before the year ends, each economic indicator is scrutinized by market players.
Agency traders will also closely watch the corporate bond market for signs of improvement, particularly as stocks stabilize. A firming corporate market could heighten demand for higher-yielding, higher risk but high grade corporates at the expense of lower-yielding top-grade agency securities, traders said.
Freddie Mac notes due July 2012 widened about 1 basis point on Friday and 5 basis points on the week, bid at a yield 70 basis points over 10-year Treasuries. Those Treasuries lost 1-2/32 on Friday, sending the yield up to 4.32 per cent from 4.19 per cent on Thursday.—AFP/Reuters