Bond Prices On The Move Higher

U.S. 10-year Treasury bond prices rose closed higher today,
after erasing major gains made early in the day. The 10-year notes rose
the most in two weeks, but prices began to fall in the afternoon. The
producer price report showed that prices fell the most since April 2003, and
also that industrial production fell, both of which helped to push bond prices
higher on a weak U.S. economy. Bonds shot up in June, when the Fed first
initiated a rate-hike pause, and began to fall 3 weeks ago on positive economic
reports. Investors hedge against short-term risks using the safety of the
long-term note. Tomorrow holds the consumer price index, which is expected
to show a slight decline.

The yen continued to extend gains against the dollar today,
after yesterday’s announcement from Russia that the country will add the yen to
its foreign exchange reserves. The yen was basically flat against the
euro, while the euro extended small gains against the dollar. The currency
market has been dominated by inflation and economic news; today’s action
followed suit, after a series of weak economic reports were released in the U.S.

Crude oil future fell 1.7% to close at $58.93 a barrel on
speculation that inventories rose and that OPEC will not cut output any time
soon. Oil has risen for three straight days, on worries that OPEC’s supply
cut would significantly affect the market. OPEC meets in two days to
discuss the possible cuts, but today’s price action highlights that investors
are not very concerned about the prospects of a cut. Natural gas futures
fell nearly 2% as the nation sits comfortably on an ample supply of the energy

Gold futures fell 0.8% as oil’s fall diminished demand for the
safe-haven futures contract. Oil has been trading hand-in-hand with gold
through the summer, as investors turn to gold for safety in the face of rising
energy costs. As oil falls, so does the need to hedge against inflation.
With a slowing economy and falling oil prices, investors found reason to sell
the metal futures contract.

Softs traded mixed today. Cocoa was up 2.7%, coffee rose
0.5% and sugar rose over 7%. Orange juice, however, fell 0.9%.

Grains traded mixed. Corn rose 1.3%, soy rose 2% and
oats rose fractionally. What fell just over 2%.

Meats mostly fell today, with cattle down 1% and porkbellies
down 0.4%.


Industrial Production Falls In September On Lower Utilities
Output (full

Wholesale Prices Fall On Steep Drop In Energy Prices (full

John Patrick Lee