Oil prices are up 55 percent this year, NO INFLATION
Oil Prices Break $50 Milestone on Supply Worries By Fred Barbash Washington Post Staff Writer Tuesday, September 28, 2004; 3:46 PM http://www.washingtonpost.com/wp-dyn/articles/A56109-2004Sep28.html Crude oil prices surged past the $50-per-barrel milestone in overnight trading in response to the triple threat of turmoil in the oil-rich countries of Nigeria and Iraq and a decline in production in the hurricane-battered Gulf of Mexico. The price slipped back to $49.90 in New York later in the afternoon after a news service report that Saudi Arabia would increase oil production from 9.5 million barrels a day to 11 million barrels. The breakthrough to $50, while anticipated, underscored the worldwide concern about the impact of rising oil prices on national economies. Stock market indices in Asia and Europe tumbled Tuesday as investors fretted. In the United States, the Dow Jones industrial average closed below the 10,000 mark Tuesday when the price of oil crept to $49.64 in regular trading Monday. Oil prices are up 55 percent this year, a trend attributed generally to long-term factors such as extraordinary demand in China and uncertainty in the Middle East.
Treasuries get whacked on oil, PIMCO and data : Treasuries opened lower and remained under pressure throughout the day after GDP was revised upward to 3.3% from 2.8% and as the November crude contract lost momentum, ending a 9-day run. PIMCO's Bill Gross' monthly comments included advising, investors who purchased bonds on a "benign outlook for inflation, they had better cash them in." Gross and the IMF announcement that they have raised their global inflation forecast to 2.6% from 2.35% also factored into today's sell off, which gave 10-year yields a late session spike to tag 4.1%. The yield curve continued to move steeper heading into the session, abated mid-session, although spread remain wider, with the 2-10-year sitting near 150 against yesterday's 148.7. The $24 bln 2-year auction ended drawing 2.620% with a cover of 2.20, indirect bidders grabbed 51.2% of the total auction. The market will be on the lookout tomorrow with personal income, personal spending, initial claims, and Chicago PMI all scheduled for release. Personal Income is expected at 0.4% (prior 0.1%), personal spending at 0.1% (prior 0.8%), and initial claims at 340K (prior 350K), and Chicago PMI at 60.0 (prior 57.3). The dollar may see signs of weakness against major currencies on IMF forecasts that the US account deficit will likely remain above 4% of GDP. The 10-years are currently -21/32nds yielding 4.085%
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