MarketWatch: January 31 - February 4, 2011
Markets in the U.S. and elsewhere have focused on signs that the U.S. economy continues to recover, although still at a very gradual pace. January’s payroll employment data and updated benchmarking for 2010 indicate that job creation remains very sluggish, even adjusting for possible weather-related effects which may have held down jobs numbers.
Concern over inflation prompted by the sharp rise in commodity prices (including oil and gas) has started to show up in Treasuries at the long end of the market. However, markets have so far been reassured by recent statements from Fed Chairman Bernanke and other central bankers that inflationary pressures will be limited for awhile (because higher commodity prices will not be fully passed through to core inflation, and excess capacity in the U.S. economy remains large). Prior to the release of January’s weak employment numbers today, yields on the benchmark 10-year Treasury bond and the 30-year bond had headed modestly upward most of the week.
The safe haven effects that have so often pushed up investor demand for U.S. national debt over the past year have subsided: optimism has increased in recent days that the Europeans might be able to agree on a new framework for working out their sovereign debt problems. Lingering in the background is fear that Middle East political turmoil could disrupt oil and other shipments moving through the Suez Canal.