Bond Yields Rise On Inflation Numbers

U.S. 10-year Treasury bond yields climbed to the highest
levels in over a week today, after the government released a report showing that
retail sales rose more than expected. The numbers sparked economic
inflationary fears, and the price of bonds fell on news that the U.S. economy
could be in better shape than earlier feared. The retail increase was the
largest move in those numbers since January. The consumer price index is
set to be released next week, and is also expected to point to rising inflation.
The Fed will be pressured to raise rates in September if government economic
reports indicate that inflation needs to be contained.

The dollar rallied against the yen and the euro on retail
sales numbers. The retail numbers showed a significant increase in sales,
questioning the reality or significance of a slowing U.S. economy. As
investors rethink the Fed’s hike pause, the dollar could be set to move against
global currencies. The ECB and BoJ are contemplating raising rates before
the year’s end, so the stage is set for an inflationary/growth battle between
the currenies.

Crude oil futures rose 0.5% to close at $74.35 on expectations
that the foiled terrorist plot in the UK will not heavily affect the airline
industry. Most airlines have reported that they will maintain their
schedules despite the planned attack. In other news, BP has announced
plans to leave 1/4 of the Alaskan pipeline production to remain open.
Natural gas fell hard today to close down nearly 4%, closing the week about 4%
higher than it started.

Metals fell hard across the board. Gold was down 0.2%,
silver fell nearly 2%, copper fell 4% and aluminum fell 0.4%.

Softs traded mixed to close the day. Cocoa traded up 0.1%,
coffee fell over 1% and sugar fell hard, closing down 3.8%.

Grains dropped across the board. Corn fell nearly 6%,
wheat fell 3%, soy fell 1% and oats dropped nearly 2%.

Meats traded lower, with cattle down fractionally and
potbellied pigs falling 3.3%.


July Retail Sales Growth Exceeds Expectations (full

Import Prices Rise On Rebound By Petroleum Import Prices (full

John Patrick Lee