10-Year Bonds Hit Yearly Highs
U.S. 10-year Treasury bonds rose to their highest prices in well over a year,
after a U.S. jobs report showed that the economy lost jobs for the first time in
4 years last month. Traders are now betting that there is a 100% chance the Fed
will cut rates next week, to ease pressure caused by an overall slowdown in U.S.
growth. The recent credit crisis has helped to push bonds to these highs, as
traders speculate that major weakness will spread through the economy, and
possible spark a recession. Bonds typically rise on weakness and fall on
strength, so traders are taking a defensive stance right now.
The dollar slumped to the lowest in a month versus the euro today, after a
jobs report showed that the U.S. economy lost jobs for the first time in 4 years
last month. The dollar also plummeted against the yen on perceived weakness.
Many investors have been expecting housing and credit weakness to begin
effecting other areas of the economy, and traders sold the dollar on what is
perceived to be the spread of weakness. The yen also surged over the euro, as
traders bought back previously borrowed yen to cover equity losses. Lately, the yen has been trading inversely with global equity markets, on the
carry trade dynamic. In general, global equity markets have had a large hand in
directing currency movements over the past few weeks.
Crude futures gained about 0.5% today, on a continuation of yesterday’s
rally. Yesterday, the U.S. announce that crude and gasoline reserves fell more
than expected last week, leading to crude rally that nearly touched recent
highs. Crude fell more than 10% as the credit crisis unfolded, but has now
nearly regained all of those losses. Natural gas futures fell over 2%, on
worries that job losses will impact demand.
Gold futures rose about 0.7%, as the dollar fell across the board. Gold
normally trades inversely to the dollar and with oil, which is exactly what
happened today. Traders fled gold weakness, in favor of perceived gold
stability. Copper futures fell over 1% on slow growth worries for the U.S.
Grains rose today. Soybeans gained 1.6%, and corn rose over 2.5%.
Stocks ended a disappointing week on a sour note, with investors rushing
for the exit following the release of the Employment Report. The Labor
Department reported that August Non-Farm Payrolls fell for the first time in
four years, showing a net loss of 4000 jobs versus the consensus estimate for a
gain of 110,000. Click
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