Bond Prices Fall On Fed Minutes
U.S. 10-year bond yields rose for the third straight day
today, after the minutes from the last Fed meeting showed that members were
still concerned about inflation. Bond prices shot up after the Fed
initiated a rate-hike pause, but investors even began to price in a rate-cut
before the year is out. However, data from last week and this week points
to the fact that the Fed is still concerned with inflation, which would
effective rule out chances for a rate cut. Bond prices have fallen since
last week, when a jobs report showed low unemployment and revised jobs numbers
from August. Investors have begun to scale out of positions that hedge on
a coming rate cut.
The dollar was little changed against the euro and the yen
today, slightly up against the euro and slightly down against the yen.
Yesterday the dollar reached its highest levels this year over the yen, on
speculations that the Fed will not cut rates soon. The dollar rose
slightly on the euro, but the euro still remains stronger against the U.S.
currency, with the ECB set to definitely raise rates before the year is out.
The major currencies have been trading heavily lately on inflationary measures
and prospects for rate hikes.
Crude oil futures fell 1.5% to close at $57.62 after investors
doubted the probability of a full-scale OPEC supply cut. An OPEC spokesman
confirmed that the cuts will be made on an individual basis, and with Saudi
Arabia quiet on the issue, investors feel that the production cuts will not
come. Oil has fallen over 20% since reaching record highs in July.
Natural gas futures fell 4.9% on ample inventories, coming off of 6-week highs
spurred by cold weather across the Midwest.
Gold futures rose fractionally today as oil continued to fall.
Gold and oil have traded lock-step through the summer, as investors seek safety
in the metal in the face of rising energy prices. Copper futures rose 1.5%
on speculation that supply will not meet current demand, with low inventories
and a price set about 87% higher than the same time last year.
Softs traded mixed today. Cocoa traded down 0.7%, coffee
traded up 0.2%, orange juice rose 2% and sugar fell 4.5%.
Grains traded mostly higher. Corn was up 3%, wheat was
up nearly 6%, soy was up 0.3% and oats were up over 5%.
Meats traded mostly lower, with cattle down 0.8% and
porkbellies down 0.1%.
Fed Minutes Show Continued Inflation Fears (full
story).
John Patrick Lee