Thread: Asian News

Originally Posted by Ichiro

Hi Fivetears,

Well, let me say that i was rather surprised with the movement of the foreign currency on Friday. I mean the sharp change in the direction of the interest rate. Both the yen and the euros dropped after the announcement of the huge US budget deficit. But, the euros recovered very fast. I bet that the Chinese are buying the euros when it dips. The Nikkei took a beating the day before because of the possible increase in the interest rate in the near future by BOJ because Japan is moving from a deflationary to an inflationary environment. The cost of oil will be the big jocker for Japan and also for southasian countries since they must import their oil.

The BOJ will probably increase the rate as early as March 06 and late as April 06. And this will happen. The Nikkei average already reflects this increase in the interest rate by BOJ. I think initially the nikkei will drop when BOJ increases the interest rate increase but the market will recover. Why? Japan's interest rate is very low and even if they increased it, it still low.. I mean less than 1 percent. Please note that the US Federal Reserve increased the interest rate in excess of 10 times... But, did the DOW drop much. No.. The bottom line is that I dont think that the increase in the interest rate by BOJ will cause a crash in the Nikkei. It will just offset the interest rate increase by the Federal Reserve.

But, if the Federal Reserve raises the interest rate by .5% in March... watch out... The dollar will soar as compared to the yen and the euros and it will have a big impact on our I fund. March is going to be a very critical month for us since FED and the European will increase their rates and Japan sooner or later.

I think by year-end the dollar/Yen exchange rate may be from 105 to 110. The outlook for the I fund looks good and we should make about 15 to 20 % return on our I fund. But, dont put all your eggs into the I fund... Put some into the C fund because the large cap stocks are very undervalued compared to the small caps. It is very important that you diversify your investments. I have been in market for over 25 years and I still continue to hold some of my stocks that I purchased 20 years ago. For one of my stock investment, the annual dividend is more than the initial investment I had made and it is already up 100x. I invest in this particular stock on a monthly basis via their dividend reinvestment program.

Good comments, I'm just curious why the next six months or longer will be anything like the last 25 years?

Hi Fivetears,

I have another ten more years before retirement with the FERS. As you know, our FERS is not much as compared to the CSRS and we have to do well in our TSP along with our other investments. As far as the social security, it will be there but at a reduced amount. The bottom line is that we have to do well in our other investments outside of FERS. As far as our TSP, I will be in the I fund as long as the chart is in an upward trend. once the trend is broken, I will bail out of the I fund. I will stay away from both the F and the S funds for the short term since they are both in a short term bearish divergence. I would look at those charts (EAFE index--provided by Stockcharts.com) very closely along with the movement of the interest rates for the I fund.

my other investments. I have my aggressive common stocks in my Roth IRA (such as AET, CVH, PRU ,etc ) and I also invest heavily in my dividend reinvestment programs. So, where am I making my money....would you believe my dividend reinvestment stocks..

Hi Roguewave,

For the US stock market, I willl continue to invest in my dividend reinvestment stocks for the next several decades which constantly increases by 10-11 percent per year. And besides I like those fat dividends. During the short run, when there is a correction in the market, I will purchase more shares to add to my stock portfolio. It is like having a big sale at Walmart.

The next six months and the next five years will be quite different as compared to the last 25 years. There will be too many new factors that will affect the market. such as China, India, oil price, budget deficit, etc. I think that China will be the major impact on the stock market in the near future. China just reminds me of when Japan was an emerging economic power many decades ago. But, the big difference is that China is more risk taking as compared to the Japanese. Japanese jobs are slowly being outsourced to China. When a person in Japan calls their bank for information on their credit card, they may be speaking to a service person in China. I am sure that China will keep a very tight control over their currency. I bet that they are now accumulating euros bonds. We just have to keep an eye on both China and India since they will have a major impact on our stock market.

Roguewave, what are your thougths about where the market is heading in the next six months and five years down the road. I am just curious..

Global: Rebalancing Made in Japan?

Morgan Stanley, Stephen Roach (New York), 10 feb 06



Investors tell me that Japan is on fire. And on the surface, it certainly seems white hot -- a stock market that is up some 50% since the spring of 2005 and an economy that our Japan team believes surged by at least a 7% annual rate in the final quarter of calendar year 2005. If that Chinese-style growth outcome comes to pass, Japan would instantly qualify as the fastest growing economy in the industrial world -- an extraordinary reawakening for Asia’s long-slumbering giant. The global implications of this development cannot be minimized: Can the world’s second-largest economy lead the way in the rebalancing of a still unbalanced global economy?

In answering that question, it helps to know where Japan has come from. Significantly, the recovery in the Japanese economy has not materialized out of thin air. After more than a dozen years of 1% real GDP growth, the economy first moved into a 2-3% growth channel beginning in 2003, and then accelerated to a 3.9% average annual pace in the first three quarters of calendar 2005. If our Japan team’s 4Q05 estimate is even close to the mark, the steady increase in momentum now seems to have moved into rarified territory. According to Takehiro Sato, our resident Japan watcher, the gains in the period just ended showed a Japanese economy firing on all cylinders -- external as well as internal demand, with the latter driven by especially impressive gains in private consumption, residential construction, and business capital spending (see his 31 January dispatch, “Japan: On Top of the World”). For my money, the most important element in this equation is Sato-san’s estimate that Japanese consumption growth may have exceeded 5% in the period just ended, pushing the year-over-year growth rate in real consumer demand to 3.6%. It would be one thing if Japan’s reacceleration were driven largely by external demand or autonomous investment. But when the consumer finally steps up, it’s a different matter altogether insofar as multiplier effects to other sectors of the economy are concerned.

A sustained pickup in Japanese consumption could also be a very welcome development for the global economy. The key here is the import side of the Japanese growth equation -- the transmission of domestic growth to any country’s trading partners -- and whether Japan’s revival of internal demand is sourced mainly at home or partly through foreign production. Historically, Japan has been a very closed economy. The import share of its GDP averaged only about 7% from the mid-1980s thorough the mid-1990s -- about half the shares in the rest of the industrial world over this period. In recent years, however, Japan has done a dramatic about-face in embracing the efficiency solutions of low-cost offshore production. The import share of its economy has moved up appreciably in response -- rising above 12% in late 2005.

Rising import penetration holds out the hope that a revival in Japanese internal demand spells heightened export impetus to the rest of the world -- moving Japan to center stage as potentially a new engine of global growth. But there has been an important shift in the mix of Japanese imports in recent years that has altered the transmission mechanism between Japanese internal demand and its traditional trading partners. As recently as 1999, the US had the largest share of Japanese imports -- implying that America would benefit the most from accelerating Japanese growth. That is no longer the case. The US share of total Japanese imports has fallen from close to 25% in 1999 to only about 13% today. The reason -- a stunning surge of Chinese imports. Japan’s purchases of goods from Greater China (the PRC plus Hong Kong) have risen from just 5% of its total imports in the early 1990s to about 22% today. The share of Japanese imports coming from Europe has also drifted down in recent years to about 11%, but it has been on a much gentler downward trajectory than the rapidly plunging US portion.

The shifting character of Japan’s imports -- both their increased share in overall Japanese GDP as well as the rebalancing of the import mix away from the US toward China -- has important implications for the broader global economy. Import channels don’t change over night. A lot of effort goes into the establishment of supply chains, distribution networks, and service operations -- underscoring the inertia of foreign sourcing patterns. It is hard and very costly to rip out one system (i.e., the low-cost China link) and replace it with another (i.e., the higher-cost American option). That means that the mix of Japan’s import demand is likely to remain something quite close to its current configuration in the years immediately ahead. Consequently, to the extent that Japan is able to sustain its recovery in domestic demand -- and in the import content of that demand -- most of the incremental benefit would undoubtedly flow to China and Asia’s increasingly China-centric supply chain. By contrast, that would leave US and European exporters largely on the outside looking in with respect to their opportunities to share the spoils of Japan’s economic recovery.

This has the potential to be a very important development on the road to global rebalancing. On the surface, Japan’s gathering recovery is good news for an unbalanced world. And it comes just in the nick of time. With the asset-dependent American consumer starting to fray around the edges as the US housing market cools, a restarting of the growth engine of the world’s second-largest economy is an especially welcome development. Yet, ironically, Japan’s long-awaited economic recovery may do little to temper the world’s largest and most serious imbalance -- America’s gaping current account deficit. That’s because American exporters have suffered a stunning loss of market share in Japan to China’s ever-ubiquitous producers. As a result, the import content of recovering Japanese domestic demand seems likely to be made increasingly in China rather than in the US.

This underscores what has long been the single most worrisome aspect of America’s current account imbalance -- that there is little hope for a fix from the export side of the equation. With US imports currently running nearly 60% greater than exports, an export-led fix for the US current account problem was always a stretch. The loss of market share in Japan by American exporters makes that even more of a stretch. That underscores the obvious -- that import compression is the only realistic hope for a meaningful US current account adjustment. And, of course, the obvious way for that to happen would be through a sharp reduction in the excesses of asset-dependent US consumption -- the one economic development that the rest of the world dreads the most.

Japan’s turnaround is nothing short of stunning. As the momentum of its economic recovery builds, the world economy will benefit from a long-overdue restarting of another growth engine. But don’t count on Japan to fix the world’s imbalances. That’s a task that remains very much in the court of the most unbalanced economy of all -- the United States.

Japan's Jan. Producer Prices Rise Fastest in 16 Years (Update4)

Feb. 10 (Bloomberg) -- Japan's producer prices rose at the fastest pace in almost 16 years last month as fuel and raw material costs increased and a weaker yen raised the price of imported goods.

An index of prices that companies pay for energy and raw materials gained 2.7 percent from a year earlier, the Bank of Japan said in Tokyo today. That was higher than the median 2.6 percent rise projected by 31 economists surveyed by Bloomberg. Producer prices have risen for 23 straight months.

Companies are becoming more successful at passing on higher costs to consumers as the economy expands, the jobless rate declines, wages increase and the Japanese spend more. Consumer prices achieved their first back-to-back gain in almost five years in December, a sign that Japan is emerging from more than seven years of deflation, and the economy probably expanded in the fourth quarter more than four times faster than in the third.

``Companies are regaining pricing power, and they are beginning to pass manufacturing and labor costs to retail prices,'' said Kono, chief economist at BNP Paribas Securities Japan. ``Japan's economy has picked up momentum since early last year, and the gap between supply and demand has narrowed.''

The yen rose to 118.41 against the dollar at 1:10 p.m. in Tokyo, from 118.81 before the report was published.

Final Goods

Costs for raw materials rose 33.1 percent from a year earlier, today's report said, the biggest increase since July 1980. Prices of final goods rose 1 percent on year, the fourth straight gain, adding to signs that deflation is easing.

The rise in final prices ``provides further evidence that Japanese companies are passing higher costs through to end users,'' Takuji Aida, chief economist at Barclays Capital in Tokyo, wrote in a report. ``Faster growth in final goods' prices will put additional upward pressure on CPI, further pulling Japan out of its long period of deflation.''

January's 2.7 gain in corporate good prices was the biggest since March 1990, when prices rose 2.9 percent, rebounding after being suppressed a year earlier due to the imposition of sales tax in March 1989. If that gain is excluded, the rise last month was the biggest since March 1981, when prices increased 3.8 percent, the bank said.

The Bank of Japan's overseas commodity index, which is a weighted average of prices of sixteen overseas commodity market including crude oil, copper and aluminum, rose 42.3 percent in January from a year earlier to a record, the bank reported Feb. 1.

Copper gained in Shanghai yesterday on expectations increasing supplies won't meet growing demand led by China, the world's biggest copper user. Copper for delivery in April rose 630 yuan, or 1.3 percent, to settle at 48,090 yuan ($5,971) a ton on the Shanghai Futures Exchange.

Shifting Funds

Prices of copper have climbed about 67 percent in China in the past year. Investors have shifted more money into metals and other raw materials after gains outpaced returns on stocks and bonds.

Aluminum futures rose 390 yuan, or 1.8 percent, to settle at 22,330 yuan a ton on the Shanghai Futures Exchange.

The average price of Oman Dubai crude, a benchmark for Asian refiners, rose about 70 percent in January from a year earlier.

Japan Airlines Corp., Asia's largest carrier by sales, said on Feb. 6 that its third quarter loss tripled from a year before on higher fuel costs and its loss amounted to 23.1 billion yen ($195 million) in the nine months ended Dec. 31. The company plans to raise prices on domestic fares by 4 percent on average in April to cover fuel cost increases.

Japan's producer prices will probably rise at a faster pace than the central bank predicted in October because of the yen's weakness and gains in commodity prices, Bank of Japan Governor Toshihiko Fukui said on Jan. 20. The bank predicted producer prices would rise 1.7 percent in the year ending March 31.

The yen fell to trade at an average of 115.56 against the dollar in January, from 103.2 a year earlier, increasing the import bill for energy and other materials.

To contact the reporter responsible for the story:
Mayumi Otsuma in Tokyo at motsuma@bloomberg.net.

By ELAINE KURTENBACH, Associated Press Writer Fri Feb 10, 7:39 AM ET

SHANGHAI, China - China's currency on Friday closed at its highest level since a July revaluation, capping a weeklong increase.


The dollar closed at 8.0505 yuan on the automatic price-matching system, down from its Thursday close of 8.0537.

The dollar opened at 8.0511 on Friday, prompting speculation that China's central bank may be encouraging the yuan's rise, perhaps to avert U.S. pressure ahead of a visit to Washington by President
Hu Jintao in April.

But a central bank official denied that suggestion, saying the currency movements were purely based on market forces. The official, who spoke on customary condition of anonymity, refused further comment.

China's yuan has risen gradually against the dollar since the central bank revalued it by 2.1 percent against the greenback on July 21, when it also switched from linking the yuan just to the dollar to basing its value on a basket of currencies.

The yuan has risen nearly twice as quickly since the beginning of the year as before, though its daily movements are still measured in hundreds and thousands of a percentage point. Since the revaluation in July, it has risen only about 0.7 percent.

The dollar opened the week at 8.0560. Before the Jan. 28-Feb. 5 holiday, it last traded in Shanghai at 8.0616 on Jan. 27.

China faces pressure from the U.S. and other major trading partners to let the yuan strengthen further. Critics of China's foreign exchange controls view the currency as undervalued and contend this gives Chinese exporters an unfair competitive advantage.

ASIA MARKETS

Nikkei slide accelerates, region mixed


By Chris Oliver, MarketWatch
Last Update: 1:31 AM ET Feb 13, 2006

HONG KONG (MarketWatch) -- Asian markets traded mixed to lower Monday, with Tokyo leading the decliners after the release of strong Japanese export data renewed speculation the Bank of Japan would begin reeling in its ultra-accommodative monetary policy in April.

Japan's Finance Ministry said the nation's current account surplus rose in December, the fourth consecutive month the surplus has been on the rise. Compared to the same month a year ago, the broadest measure of Japan's trade in goods and services gained 8.6% to 1.75 trillion yen ($14.8 billion), adding to the picture of an economy on the mend.

Bank of Japan Governor Toshihiko Fukui said Monday the central bank would seek policy change once economic conditions are favorable, according to Reuters reports.

"We introduced the quantitative easing framework as an abnormal policy by sacrificing interest rate mechanisms when the economy was in crisis," Fukui told a parliamentary committee.

"So, once economic conditions are relatively favorable, we need to change it and move to a regular policy of targeting interest rates," he said.
Tokyo's Nikkei 225 declined 380.17 points, or 2.34%, to close at 15,877.66. The broader Topix Index fell as much as 37.03 points to 1,626.49.

It is widely believed normalization of interest-rates could lead to strengthening of the yen against the dollar, and knock back export growth and corporate profits.

In currencies, the dollar stabilized against the yen with the greenback buying 117.86 yen, up 0.28 yen for the session. On Friday the dollar slipped from the 118-yen range, declining nearly 1% on disappointing U.S. trade deficit data and initial suggestions the Bank of Japan may be forced to tighten its monetary policy.

United States trade data released last week revealed the nation's trade deficit widened by 1.5% in December to $65.7 billion, pushing the gap for all of 2005 to $725.8 billion.

Adding to the jitters across Asia was a busy schedule of economic data due to be released this week in Washington, coupled with the first formal presentation by new Fed chief Ben Bernanke, due to speak before Congress.
In South Korea, the Kospi Index fell as much as 0.76%, while the Shanghai Composite Index was off as much as 0.74%.

In Taiwan, the Weighted Index traded basically flat, off just 0.07%. Sydney's All Ordinaries fell as much as 0.86% as commodity prices continued to dip.
Singapore's Straits Times Index rose as much as 0.28%.



Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.

FOREX-Dollar at 6-wk high vs euro ahead of Bernanke
Mon Feb 13, 2006 3:42 AM ET

By Katie Hunt
LONDON, Feb 13 (Reuters) - The dollar hit a six-week high against the euro on Monday, as investors expect new Federal Reserve Chairman Ben Bernanke to signal this week that dollar-supportive U.S. interest rate rises will continue.
Bernanke is due to testify to the House Financial Services Committee on Wednesday, his first public appearance to discuss the economy and monetary policy since becoming chief U.S. central banker.

"People are lightening up on some short dollar risk going into Bernanke," said Paul Mackel, currency strategist at ABN AMRO.

"Our bias is that U.S. rates will hit five percent by the middle of this year. He could be upbeat," he added.

Mounting expectations the Fed will keep raising interest rates after 14 straight increases to 4.5 percent has helped the dollar rebound from a slide earlier this year, when investors fretted the currency's yield advantage would shrink.
By 0830 GMT, the euro was holding steady at $1.1902 <EUR=> after falling as low as $1.1888 -- its lowest since Jan. 3.

The dollar was at 117.87 yen <JPY=>, little changed from its level in late U.S. trade on Friday, and well off a seven-week high of 119.40 yen struck earlier this month.

The dollar fell as low as 117.52 yen in early trade, after data showed Japan's current account surplus rose unexpectedly in December from a year earlier, helped by a recovery in exports.

The dollar was at 1.3065 Swiss francs <CHF=>, near Friday's peak of 1.3086 francs, its highest since Jan. 3.

STAY FIRM
The dollar had jumped to multi-week highs against the euro and the Swiss franc on Friday, recovering from an initial slide after data showed the U.S. trade deficit swelled more than expected in December and ended 2005 at a record $725.8 billion.

Traders said the dollar would likely stay firm ahead of Bernanke's testimony on the Fed's semi-annual monetary policy report.

"It seems people are in no hurry to sell the dollar right now, especially with Bernanke's testimony coming up later in the week," said Katsunori Kitakura, senior forex trader at Chuo Mitsui and Trust Banking in Tokyo.

The yen has recovered from seven-week lows against the dollar hit earlier this month as the Bank of Japan has signalled its super-loose policy is almost certain to end in the next few months and overnight rates could rise slightly from virtually zero.

Bank of Japan Governor Toshikiko Fukui said on Monday the BOJ needed to end its ultra easy policy once economic conditions were favourable, and then move to a regular monetary policy targeting interest rates.

Expectations for an end to the BOJ's "quantitative easing" policy as early as March have helped push two- and five-year Japanese government bond yields to five-year highs.

The market shrugged off a weekend meeting of Group of Eight finance ministers in Russia that focused on energy prices and paid little attention to exchange rates.

Euro zone finance minister will meet in Brussels later on Monday.

© Reuters 2006. All Rights Reserved.

GLOBAL MARKETS-Commodities retreat hurts stocks, dollar firm
Mon Feb 13, 2006 5:38 AM ET

By Lincoln Feast

LONDON, Feb 13 (Reuters) - European shares stalled on Monday, weighed down by a slide in Asian markets and weaker mining companies as metal prices fell, while the dollar hit a six-week high against the euro on expectations of more U.S. interest rate rises.


Euro zone government bonds eased as strong Italian output data dented sentiment ahead of a heavy supply pipeline this week and ahead of Wednesday's first major policy speech from new U.S. Federal Reserve Chairman, Ben Bernanke.

Expectations that Bernanke's testimony to the House Financial Services Committee will signal that dollar-supportive interest rate rises will continue beyond the current 4.5 percent boosted the dollar.

"People are lightening up on some short dollar risk going into Bernanke," said Paul Mackel, currency strategist at ABN AMRO.

"Our bias is that U.S. rates will hit 5 percent by the middle of this year. He could be upbeat," he added.

The dollar hit a six-week peak of $1.1882 per euro <EUR=>, while against the Japanese currency <JPY=> the dollar was up about a third of a percent at 118.2 yen.

The dollar fell as low as 117.52 yen earlier in the session after data showed Japan's current account surplus rose unexpectedly in December, helped by a recovery in exports.

NIKKEI RETREATS, EUROPE STALLS

But exporters led a decline in Japan's Nikkei <.N225> as the rise in the yen gave investors an excuse to cash in some of their holdings of Japanese stocks after a stellar run since May last year.

"Some investors appeared to be unwinding their long positions on the U.S. dollar, pushing up the yen, while foreign investors may be taking profits on Japanese stocks," said Masaki Iso, chief investment officer at Yasuda Asset Management Co. Ltd.

The Nikkei closed down 2.3 percent at 15,877.7 points, ending below 16,000 points for the first time since Jan. 26.

European stocks were treading water as the retreat in Asia offset a late rally on Wall Street on Friday.

The FTSEurofirst 300 <.FTEU3> index of leading European shares was 0.1 percent firmer at 1,326 points.

Roche (ROG.VX: Quote, Profile, Research) weighed, falling 3 percent after the drug maker said it had temporarily suspended recruitment for a clinical trial on its Avastin colon cancer drug because of a number of deaths.

Mining companies were among the worst performers as prices for metals including gold, platinum, zinc and aluminium fell sharply.

BHP Billiton (BLT.L: Quote, Profile, Research), the world's top mining company, was down 1.52 percent at 1035 GMT at 941 pence.

Gold dropped as low as $544.30 an ounce as fund selling saw it break key support at $548 an ounce.

Analysts saw little reason to call an end to the rally in gold and other metals just yet, however.

"This is a healthy correction brought on by profit-taking, and it will enable gold to move up and challenge the previous high," Frederic Panizzutti, analyst at MKS Finance, said.

"There is some hesitation about where to come in with new long positions, but I don't see much in the way of short positioning."

OIL SLIPS

Oil prices were also lower as healthier inventories in the United States offset concerns about Iran's nuclear programme. U.S. light crude oil futures <CLc1> held below $62 a barrel.

Euro zone government bonds softened on worries about rising U.S. and European interest rates, worries not helped by data showing surprisingly strong growth in Italian output and British producer prices.

Benchmark 10-year euro zone bonds <EU10YT=RR> yielded 3.51 percent, while the March Bund future <FGBLH6> fell 46 ticks to 120.10.
© Reuters 2006. All Rights Reserved.

LATEST FOREX NEWS

China oil consumption to rise 5.4-7.0 pct in 2006 - NDRC

Sunday, February 12, 2006 12:42:32 PM
http://www.afxpress.com


BEIJING (AFX) - China's oil consumption is expected to rise by 5.4-7.0 pct this year compared to last year, state media reported, citing a report by the National Development and Reform Commission

The world's second biggest oil consumer after the United States consumed 318 mln tons of oil last year, according to the commission

It did not explain the reason for the increase, but China's booming economy is becoming increasingly dependent on oil

Some 75 pct of China's oil this year will be consumed by the transportation sector, Xinhua cited the commission as saying. It noted the increasing purchases of automobiles as one factor behind the rise

China is expected to import 44 pct of its oil demand this year, according to the commission

The country became an oil net importer in 1993 and has since been racing to secure resources abroad to power its booming economy as domestic production has fallen into an overall decline

cs/ben/net For more information and to contact AFX: www.afxnews.com and www.afxpress.com

February 13, 2006

latimes.com : Business


Some Expect 2 Rate Hikes

# Nervous bond investors have pushed up shorter-term yields. They will look for clues when the new Fed chief testifies on Capitol Hill.

By Tom Petruno, Times Staff Writer

Wall Street had been hoping for "none, or one and done" in terms of additional Federal Reserve interest rate increases. But a recent jump in yields on shorter-term Treasury securities suggests that investors are losing faith that the central bank is ready to take a break.

The outlook for rates will be center stage this week in financial markets as Ben S. Bernanke gives his first congressional testimony as Fed chairman.

Bernanke, who succeeded Alan Greenspan on Feb. 1, goes before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday, delivering the semiannual monetary policy report required by law.

The backdrop for his coming-out party is an increasingly nervous bond market, where investors last week pushed shorter-term Treasury security yields to the highest levels in five years — delighting savers but threatening borrowers who have certain adjustable-rate loans.

The annualized yield on six-month T-bills hit 4.69% on Friday, up from 4.63% a week earlier and the highest since early 2001.

The two-year T-note yield ended Friday at 4.68%, up from 4.57% a week earlier and also the highest since 2001.

Short-term rates had stabilized in December and early January as more bond investors felt comfortable that the economy would slow and that the Fed soon would halt its 18-month-long credit-tightening campaign, which has lifted its key rate to 4.5% from 1%.

That optimism was reinforced Jan. 3, when the Fed released the minutes of its mid-December meeting. The minutes said policymakers believed that the number of additional rate increases "probably would not be large."

Despite some recent signs of weakness in housing, however, many analysts believe that the economy overall remains on a healthy growth track — healthy enough to justify at least two more Fed rate boosts, some say.

Jack Malvey, a fixed-income strategist at brokerage Lehman Bros. in New York, said he expected the Fed to raise its key rate to at least 5%, and perhaps 5.25%, before stopping.

The sudden jump in short-term Treasury yields in the last three weeks matches the market's catch-up pattern during much of 2005, Malvey said: Many investors last year kept betting that the Fed was finished, only to face quarter-point rate hikes at every central bank meeting.

"The bond market for the last year has consistently underestimated the vigor of the U.S. economy," Malvey said.

In the financial futures market, where investors bet on upcoming Fed rate changes, trading last week showed that investors believed that a quarter-point hike at the Fed's March 28 meeting, to 4.75%, was a certainty.

More surprising is that the futures market now is leaning toward a hike at the mid-May meeting as well. That would bring the rate to 5%.

If that sentiment spreads, shorter-term Treasury yields are bound to head higher — which means that savers might be better off waiting before locking in yields, financial advisors say.

At current levels, shorter-term Treasury yields "are barely positioned for one more rate hike that would stick," let alone two or three hikes, said Lou Crandall, an economist at Wrightson ICAP in New York.

Meanwhile, for homeowners with a popular type of adjustable-rate mortgage that is pegged to one-year Treasury yields, every notch higher could spell bigger monthly payments come adjustment time.

The U.S. labor market may be key in shaping the Fed's decisions on rates in coming months, economists say.

In recent weeks, the number of new claims for unemployment benefits hit a six-year low. That could point to strength in job creation and to a generally tightening labor market.

For the Fed, a relative shortage of labor could raise fears of an inflationary spiral if employers pay significantly more for workers and in turn pass that cost on to the buyers of their goods or services.

"The issue for Mr. Bernanke … is whether a falling unemployment rate and rising wage gains mean that price inflation is likely to pick up," said Edward Yardeni, an economist at investment firm Oak Associates in Akron, Ohio.

By continuing to raise rates, the Fed would be using its principal tool to slow consumption and damp inflation pressures.

On Capitol Hill this week, Bernanke is sure to face questions about his inflation outlook, the labor market and whether the Fed risks pushing the economy into recession if it continues to tighten credit.

And although most economists believe that Bernanke will speak more clearly than Greenspan — who was famous for his verbal gymnastics — they say it's unlikely the new chief will allow his questioners to pin him down in terms of how close the Fed might be to ending its rate-raising campaign.

"While he probably will reiterate that further tightening 'may be needed,' there is no need for him to commit himself to anything at this point," economists at Goldman Sachs & Co. said in a report to clients Friday.

Indeed, the Fed in recent months has made clear that its next moves with rates will depend on what the economic data show. And that means that policymakers themselves may not be sure where they'll stop, analysts say.

Some economists are worried the Fed already has gone too far.

"I think they should pause now," said Joseph Carson, an economist at Alliance Capital Management in New York.

He believes that many U.S. households are stretched financially because of heavy borrowing over the last few years, and that as a result consumer spending is bound to decelerate markedly this year.

Despite some data to the contrary, "I'm pretty convinced the economy is slowing down," Carson said.

The Treasury bond market also is giving a classic sign that it expects a slowdown: Yields on longer-term securities have been below yields on shorter-term securities in recent months, a so-called rate inversion.

The 10-year Treasury note yield, for example, was 4.59% on Friday, 0.1 point less than the yield on six-month T-bills.

Normally, longer-term securities pay more. Historically, when inversions have occurred, they often have been preludes to economic weakness: Investors were willing to lock in less on longer-term securities because they figured all interest rates would be dropping soon because of a slowing economy.

This time, however, many on Wall Street say longer-term bond yields are being held down by pension funds and insurance companies worldwide that have voracious appetites for long-term, fixed-rate securities, as they seek to better match up their assets with what they'll owe retiring baby boomers over the next few decades.

Case in point: The government last week sold new 30-year T-bonds at a yield of 4.53% — well below yields on 10-year T-notes and those on shorter-term issues.