-- Dollar Libor edges up from record-low
The early read on stronger growth closed out a year in which the economy contracted at a 2.4 percent pace, the biggest decline since 1946, and analysts say they are well aware of weaknesses still clouding the growth outlook. Much of the fourth-quarter growth came as companies simply didn't allow inventories to run down as much as previously, while a 10 percent jobless rate is unlikely to go away soon, leaving analysts to wonder how soon the economy can withstand rate hikes.
"Fed hikes are certainly a second-half-at-best scenario, and what the market continues to grapple with is whether 2010 is even really in play. It's not obvious," said Carl Lantz, US interest rate strategist at Credit Suisse in New York. "I think it's probably not quite as bearish for rates as it appears on first blush," Lantz added about the GDP data.
The November contract is the first to fully factor in a hike from the Fed's current historic low target of 0.0 to 0.25 percent. Earlier this year, the August contract was in play for the first rate increase. Some analysts cautioned, however, that the firming rate futures, reflecting a decrease in bets on hikes, might leave some investors poorly placed if subsequent data affirms the fourth-quarter's strength.
Given prevalent doubts about and bets against the economy's staying power, some analysts say a bigger risk is that investors will have to take into account rate hikes that could be closer than many thought. Elsewhere, dollar Libor rates came off a multi-day record low of 0.24875 percent to reach 0.24906 percent, a one-week high.