Bond Prices Halt Slide
U.S. 10-year Treasury bonds ended a four day slide today,
closing moderately higher on inflationary news. The Beige Book report
showed that consumer spending increased in some areas, but that wage growth
around the nation was "modest." Despite some positive signs, investors
took the report’s numbers as more indication that the economy is cooling, and
that the Fed will be forced to reduce rates soon. Bond prices shot up in
June when the Fed ended its tightening cycle, and some investors began to hedge
that the Fed would be forced to cut rates in the coming months. Over the
last three trading days, bond prices have fallen drastically on reports that
showed the economy might not be cooling, which prompted investors to unload bets
that the Fed will cut rates soon.
The dollar fell against the yen and the euro today after a
report showed that the U.S. trade deficit expanded to a new deficit for the
second straight month. The currencies have been trading heavily through
the summer on inflationary and interest rate concerns, and this report would
indicate a sagging economy, and could prompt the Fed to initiate rate cuts.
The euro remained basically unchanged against the yen
Crude oil futures rose 0.6% to close at $57.96 a barrel today.
The inventories report showed a dramatic decline in heating oil reserves, which
helped to prop up the crude contract, which is trading near its yearly lows.
Crude is down over 20% from its July highs. Natural gas fell 5.9% today
after inventories released today showed new record levels of supply.
Despite a cold snap in the Midwest and Northern U.S., the price of natural gas
plummeted on the inventory news.
Gold future rose 0.5% after a report yesterday showed that the
Fed is still worried about inflation. Investors sought safety in the
futures metal as a hedge against rising prices, brought on by inflation.
Gold also rose in step with oil, and has been trading hand-in-hand with the
energy contract through the summer. Copper was basically unchanged.
Softs traded mixed. Cocoa was down 0.6%, coffee was up
0.2% and sugar rose fractionally. Orange juice rose 16% after the USDA
estimated that this year’s projected supply would come in much lower than
Grains traded mixed today. Corn was up 5%, wheat was
down nearly 3%, soy was up 3% and oats were up nearly 4%.
Meats traded mixed, with cattle down 1.6% and porkbellies up
Crude Inventories Rise Again (full
John Patrick Lee