Bonds, Dollar Close Unchanged
U.S. 10-year Treasury bond notes remained flat today at weekly
lows, after plummeting on Friday on a better-than-expecting jobs report.
Investors had been hedging that continued weak economic reports would lead to
rate cuts from the Fed, but Friday’s jobs report shook the market and sent bonds
plummeting. Investors sold the long-term note on speculation that the
economy is not slowing as much as once feared, which would negate the need for
rate cuts. Bonds shot up in June, when the Fed initiated its rate-pause,
but fell after September’s released minutes showed a lingering fear of
inflation.
The dollar rose against the yen and was flat against the euro
today, after the Chicago Fed President said that the Fed might need to raise
rates to keep a lid on inflation. The dollar surged on the euro and yen
Friday, but held steady at those levels today. Currency markets have been
dominated by interest rate and inflationary concerns, so any rate or
inflationary discussions reverberate through the currency sphere. The ECB
looks the strongest out of the currencies, with the Central Bank set to raise
rates before the year is out to combat inflation. Japan’s overnight rate
remains low, and the country has wavered in its rate stance in public economic
announcements. Weeks ago, investors were betting that the U.S. would lower
rates before the year is out, but with the recent jobs report, it looks as
though the Fed will keep rates at 5.25% through the year.
Crude oil futures rose 1.6% to close at $60.09 a barrel, after
OPEC warned again of production cuts. An OPEC spokesman said that the cuts
would be considered and possibly implement the cuts at their next meeting.
OPEC has been calling for oil cuts for a few months, citing the need to curb the
falling price of oil. However, the organization has not been able to
create and present a unified front, and the slide has continued, with oil down
nearly 25% from its July highs. Natural gas fell 5% on continued warm
weather forecasts, which reduces demand for the energy used to heat homes.
Gold futures fell 0.2% as continued to rise on the jobs
report. Gold trades inversely with the dollar, as the metal is used as a
hedge against rising inflation. Gold is down nearly 20% from its May
highs, and has fallen steadily with oil. Copper traded nearly flat on the
day.
Softs traded mixed today. Corn was up 0.6%, coffee rose
0.6%, orange juice fell nearly 1% and sugar rose nearly 4%.
Grains traded higher across the board. Corn was up 0.3%,
wheat rose 1%, soy rose fractionally and oats rose 1%.
Meats fell today, with cattle down 1% and pork bellies down 1%.
No major economic news to report today.
John Patrick Lee