Economy still worsening across U.S.: Beige Book

(MarketWatch) - The economy continued to worsen across the United States in March and early April, amid scattered signs that the pace of the decline was lessening in some regions, the Federal Reserve reported Wednesday in its Beige Book account of the economy.

"Overall economic activity contracted further or remained weak," the Fed said, based on reports from thousands of business sources across the country. "However, five of the 12 districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level."

The report, written by the economics staff at the Dallas Fed, generally agrees with comments by top policymakers that there are some signs that the economy may be getting worse at a slower pace.
The economy declined at a 6.3% annual pace in the fourth quarter, and economists are forecasting a decline of 5% in the first quarter and about 2% in the current quarter.

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Bond rally picks up steam on Bear Stearns call

(Reuters) - As investors bet the Federal Reserve would have to intervene by cutting interest rates, two-year notes surged 6/32 and were offering a yield of 4.49 percent, down a full 10 basis points in just one session.




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Dollar Approaches Record Low Versus Euro After Decline in Payroll Growth

(Bloomberg) -- The dollar fell the most in almost a
month against the euro, trading within a cent of its record low,
after U.S. reports showed slowdowns in payroll growth and service
industries.

The U.S. currency also declined versus the yen and pound as
speculation rose that the Federal Reserve will cut interest rates
by year-end, trading in futures contracts show. The yen gained
after investors sold higher-yielding assets funded by loans in
Japan amid concern over losses from U.S. subprime mortgages.


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TREASURIES-Steady in Asia ahead of core PCE

(Reuters) - Later this session, investors will focus on the release of
the Federal Reserve's favoured inflation measure -- the "core"
personal consumption expenditures price index -- to gain
hints on the chances of a Fed rate cut later this year.




Concerns about fallout from the market turmoil has helped
reignite talk of a Federal Reserve rate cut from the current 5.25
percent, with the futures market now factoring in a 70 percent
chance of a quarter-point rate cut by year-end.


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U.S. Benchmark Treasury Yield Holds Below 5 Percent on Mortgage Concerns

(Bloomberg) -- U.S. 10-year Treasury yields held
near the lowest in two months as investors sought the relative
safety of government debt on concern that losses on subprime
loans in the U.S. will hurt the broader economy.

Benchmark yields stayed below 5 percent for a second day
before a report this week that's expected to show home sales
fell to the lowest in four years in June. Federal Reserve
Chairman Ben S. Bernanke last week said inflation will recede
and housing market weakness may slow the economy.


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European Bond Yields at Seven-Week Low as Subprime Concern Hurts Stocks

(Bloomberg) -- European 10-year bond yields were at
the lowest in seven weeks as stocks declined in Europe, Asia and
the U.S., underpinning demand for the safest assets.

The yield on the benchmark 10-year bund fell to the lowest
since May on concern defaults on U.S. subprime mortgages will
spread to the wider economy. European and Asian stocks dropped
today after declines in the U.S. on Friday as Federal Reserve
Chairman Ben S. Bernanke said inflation will recede and housing
market weakness may slow economic expansion.


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S. African Rand Gains in Week on Expectations Interest-Rate Gap to Widen

(Bloomberg) -- South Africa's rand advanced for a
fourth week, its best performance in almost a year versus the
dollar, on expectations the interest-rate gap with the U.S. will
widen.

The rand touched its highest in 11 months yesterday, buoyed
by expectations the Reserve Bank will keep raising borrowing
costs and on speculation the U.K.'s Standard Chartered Plc is in
talks to buy South Africa's Nedbank Group Ltd. The dollar held
near a record low against the euro on views slowing economic
growth will prevent the Federal Reserve from raising U.S. rates.


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TREASURIES-Bonds steady on Bernanke's balanced view

(Reuters) - NEW YORK, July 19 - U.S. government debt prices
finished steady on Thursday, caught between warnings from
Federal Reserve Chairman Ben Bernanke about inflation and
threats to growth from a weak housing market.




Sharp gains in stocks, driven by upbeat earnings news that
pushed the Dow Jones industrial average to an unofficial close
over 14,000 for the first time, also kept a lid on bond prices,
analysts said.


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TREASURIES-Bond stable as Bernanke balanced

(Reuters) - NEW YORK, July 19 - U.S. Treasuries coasted
sideways on Thursday as Federal Reserve Chairman Ben Bernanke
balanced concerns on housing with warnings on inflation.




Bonds recovered losses after the central bank chief argued
there would be substantial financial losses associated with
risky home loans, known as subprime.


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Copper Gains on Speculation Global Economic Growth to Boost Metal Demand

(Bloomberg) -- Copper in New York gained the most
in more than two weeks on speculation that global economic
growth will increase demand for the metal used in homes, cars
and appliances.

China's economy in the second quarter expanded at the
fastest pace in 12 years, the statistics bureau said in Beijing
today. Federal Reserve Chairman Ben S. Bernanke said yesterday
U.S. growth will pick up ``a bit'' next year. The price of
copper has gained more than fourfold in the past four years as
worldwide demand outpaced production.


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Bernanke Prepares Ground for Longest Interest-Rate Freeze in Two Decades

(Bloomberg) -- Federal Reserve Chairman Ben S.
Bernanke is preparing the ground for the longest freeze in
interest rates in two decades.

Bernanke, delivering his semiannual economic testimony to
Congress yesterday, presented trimmed forecasts for growth this
year and next because of the prolonged housing recession. At the
same time, he said the ``predominant'' concern is that inflation
won't recede as forecast.


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Treasuries Little Changed as Bernanke Says Economic Growth Will Pick Up

(Bloomberg) -- Treasuries were little changed as
Federal Reserve Chairman Ben S. Bernanke predicted U.S. economic
growth will pick up slightly next year and inflation will
gradually recede.

The yield on the benchmark 10-year note rose almost 1 basis
point, or 0.01 percentage point, to 5.05 percent at 10:05 a.m.
in New York, according to bond broker Cantor Fitzgerald LP. The
price of the 4 1/2 percent note due in May 2017 fell 2/32, or 63
cents per $1,000 face amount, to 95 3/4. Bond yields and prices
move in the opposite direction.


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Gold hits six-week high as dollar slumps

(Reuters) - Gold hit a six-week high on Wednesday as the dollar tumbled to a record low against the euro, but dealers traded cautiously ahead of a testimony by U.S. Federal Reserve Chairman Ben Bernanke.

Analysts were not yet convinced the upward price move was sustainable as recent spikes prompted investors to take profits.


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Dollar's Trade-Weighted Index Falls to a Record Low on Economic Slowdown

(Bloomberg) -- The Federal Reserve's trade-weighted
dollar index this week fell to the lowest since its inception in
1971 on speculation slowing U.S. economic growth will stop the
Federal Reserve from raising interest rates.

``Breaking through those levels marks a new stage of the
week dollar trend,'' said Koji Fukaya, senior currency
strategist in Tokyo at Deutsche Securities. ``The dollar's
depreciation may further accelerate.''


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NEXT UP-Bond traders primed for mortgage theme from Bernanke

(Reuters) - Traders will listen for any suggestions from lawmakers
indicating they envision new waves of legislation to regulate
the credit industry, which many blame for loose practices that
led to the meltdown of the subprime mortgage sector.




Regulators, including the Federal Reserve Board, announced
on Tuesday their latest effort to come to grips with subprime
in a plan to conduct joint consumer-protection reviews of
non-depository sub-prime mortgage lenders. See
[ID:nN17237094].


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WRAPUP 2-U.S. overall producer prices fall in June, core up

(Reuters) - WASHINGTON, July 17 - A big drop in gasoline
prices pulled U.S. producer prices down in June but a closely
watched measure of core inflation rose at a pace likely to keep
concerns about inflation on policy-makers' minds.




Separately, the Federal Reserve said on Tuesday that output
by U.S. factories, mines and utilities increased by 0.5
percent, bouncing back from a 0.1 percent May decline partly on
a surge in production of new cars and trucks.


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Dollar Near Record Low Against Euro Before Reports on Inflation, Housing

(Bloomberg) -- The dollar traded near a record low
against the euro before government reports today that are
forecast to show inflation and home building slowed.

The U.S. currency fell to a 26 year-low against the pound
and the weakest since March 1985 versus the New Zealand dollar
on speculation the Federal Reserve will keep interest rates on
hold this year. The euro pared earlier gains against the dollar
after a report showed German investor confidence declined for a
second month in July.


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U.K. Pound Rises to 26-Year High Against Dollar After June Inflation Data

(Bloomberg) -- The pound rose to a 26-year high
against the dollar after a report showed U.K. inflation exceeded
the Bank of England's 2 percent limit for a 14th month in June.

The U.K. currency posted its biggest gain in a week on
speculation the BOE will keep raising interest rates while the
Federal Reserve stays on hold, increasing the attraction of
pound-denominated assets. Investors raised bets on how high BOE
policy makers will lift borrowing costs following the release of
the inflation report, futures trading shows.


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U.S. Treasuries Little Changed Before Inflation, Housing Reports, Bernanke

(Bloomberg) -- U.S. Treasuries were little changed
before government reports this week that will probably show
inflation slowed and home building declined.

Notes have risen in the past week on speculation weakness
in the subprime mortgage market will exacerbate falling home
values and damp economic growth. Federal Reserve Chairman Ben S.
Bernanke may be questioned about housing on July 18 and 19 in
semi-annual testimony to the House Financial Services Committee.


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U.S. June import prices up 1.0 pct

(Reuters) - Imported petroleum prices climbed 4.7 percent in June, the
fifth straight monthly gain, after an upwardly revised 3.7
percent rise in May. The department said that petroleum prices
were up 28.1 percent since January but up only 2.1 percent from
a year ago.




Excluding petroleum, import prices - which are monitored
closely by the Federal Reserve policy-makers as a potential
source of inflation - edged up 0.2 percent after a 0.5 percent
gain a month earlier.


Read more at Reuters.com Economic News