Treasuries sag on inflation jitters, Fed's Lacker
Wed Dec 21, 2005
By Ros Krasny
CHICAGO, Dec 21 (Reuters) - U.S. Treasury debt prices fell on Wednesday after revised third-quarter growth figures revived worries about inflation and undermined ideas of a fast end to Federal Reserve interest rate hikes.
Keeping the pressure on was a generally upbeat view on the economy from Dallas Richmond Fed President Jeffrey Lacker, who will be a voting member on the Federal Open Market Committee in 2006.
In a speech in Charlotte, North Carolina, Lacker said the U.S. economy was poised to growth by 3.5 percent in 2006 and that inflation risks from high energy prices had not fully passed through.
"We at the Fed are well-positioned to resist inflation pressures, should they emerge," he said. The Fed "should respond vigorously" if inflation expectations rise.
The 10-year Treasury note fell 7/32 in price for a yield of 4.492 percent, up from 4.466 percent on Tuesday. The benchmark yield tested 4.50 percent, a level last traded on Dec 15, but quickly reversed.
Earlier on Wednesday, the government slightly revised up a key inflation measure while trimming its final estimate of third-quarter U.S. economic growth.
The core personal consumption expenditures index, the Fed's preferred inflation measure, was lifted to 1.4 percent from the earlier reading of 1.2 percent.
"Over the past year, inflation has increased 2.9 percent, its fastest growth since 1991," said Steven Wood, economist at Insight Economics.
Deferred Eurodollar futures for delivery in 2006 fell sharply for a second straight day as dealers dusted off ideas that the Fed could push the fed funds rate to 5.0 percent in 2006 to halt the spread of inflation.
"Ever since hitting their December peak late last week, liquidation has ruled into year-end as the market steps back from its view that a peak in the interest rate cycle was near at hand after the Fed dropped 'accommodative' from its statement," said Eurodollar strategists at Action Economics.
Chance of a January Fed hike are still at 90 percent, and for the March meeting potential for an increase rose to 70 percent, the highest in more than two weeks.
Even though third-quarter growth was revised lower, the U.S. economy continues to expand above potential, keeping fear of inflation alive and suggesting less need for a sudden end to Fed tightening.
The 30-year bond fell 12/32 for a yield of 4.680 percent, up from 4.654 percent. Five-year Treasury notes fell 4/32 for a yield of 4.4330 percent, up from 4.400 percent. Two-year note yields were at 4.440 percent, up from 4.410 percent.
The two-year/10-year yield spread remains at about five basis points, similar to Tuesday. The spread has not traded at parity, or zero basis points, for five years.
Market plays are keen to see if the yield inverts because such a move in the past has often -- but not always -- been a leading indicator for recession.
Per il t-bronx io ho scaricato qualcosa a 112,65625, quello che avevo sul t-note invece fuori tutto, non ho voglia di avere i piedi su troppe staffe. 
... 
... cucino pure a occhio 
, cosi non devo leggere i numeri sulla bilancia 
se non fanno uno sprint finale sopra il pivot, la candela daily resta comunque negativa per domani con accenno di disegno canalina ribassista su frame bassi
