U.S. CREDIT MARKET OUTLOOK - SPENDING, M-1
Brisk increases in personal income and
consumption are to appear in February data released today, but
the bond market's recent sluggishness suggests there will be no
major price reaction unless the rises are much larger than
expected, economists said.
    Personal income is forecast to rise by 0.6 to 0.8 pct,
compared with no change in January, while consumption
expenditures are projected to increase 1.4 to 1.6 pct,
reversing most of the two pct drop recorded in January.
    M-1 money supply data for the March 9 week will also be
released. An increase of some 2.3 billion dlrs is expected.    
    Peter Greenbaum of Smith Barney, Harris Upham and Co Inc
expects a one pct rise in income, led by a strong gain in wage
and salary disbursements in February.
    Nonfarm payrolls expanded by 337,000 jobs in February, the
average workweek lengthened by 0.6 pct and hourly wages rose by
four cts, he noted in a report. Vigorous spending on durable
goods last month, especially cars, foreshadow a rise of at
least 1.5 pct in consumption, he added.
    The prospect of bearish data did not trouble the bond
market much yesterday, with the 30-year Treasury bond slipping
just 7/32 to 99-28/32 for a yield of 7.51 pct.
    Analysts said the market is still trapped in a narrow
range, desperately seeking direction.
    "Seasonally adjusted, it's already December in the bond
market," quipped Robert Brusca of Nikko Securities Co
International Inc.
    Paul Boltz of T. Rowe Price Associates Inc said the
steadiness of long bond yields around 7.5 pct, despite some
signs of a stronger economy, probably reflects expectations
that inflation will remain subdued.
    But he warned that this assumption might not be justified.
    "It took the bond market a long while to see that inflation
was not returning to double digits, and now that it has learned
that lesson, it may be a little slow to see that a four to five
pct inflation is a real possibility ahead," Boltz said in a
report.
    After trading late yesterday at 5-15/16 pct, Fed funds were
indicated by brokers to open comfortably at 5-15/16, six pct.
 Reuter
