I would say the economic news is generally trending positive. Unemployment claims are staying very low, indicating few job losses. The 3rd quarter GDP was revised up to 4.4%, which is excellent performance and it appears that the 4th quarter may be even stronger. The strength is coming from exports, surprisingly, and investment, which is a positive. People are building data centers, factories and other structures that provide good construction jobs but also more employment when those buildings are occupied. Inflation, while reports are somewhat delayed, appears to be at an acceptable level, around 2.8% year-over-year, with no signs of acceleration in prices. Prices for services are rising faster than prices for goods, and I am sure the Federal Reserve would like to see that number decline to closer to 2%. Wage growth, however, also appears to be slowing, which is not a positive. We need real, after inflation wage growth to be significantly higher than inflation, particularly inflation in food, housing, medical and utility costs.
There was a 20-year bond sale on Wednesday. The face amount of $13 billion was sold at an interest rate of 4.86%, up from last month, but slightly lower than expected. Overall demand was very good, although foreign buying was a little weaker than usual. The only other auction was a ten-year TIPs, or inflation protected bond sale, today. That auction resulted in a “real” yield of 1.94%. This is comparable to the most recent similar auctions but up from those in the fall, and well below yields in the spring. Overall demand was moderate. In the aftermarket the ten year rate has crept up over recent months. The next few auctions of US debt of all maturities will be interesting to watch.
