Bonds Climb On Weak Data

U.S. 10-year Treasury bonds rose for the 7th straight day
today, after the ISM report showed that manufacturing grew last month at the
slowest pace in 3 years. This negative economic news fed demand for safety
in the long-term yield, as investors look to hedge against a slowing U.S.
economy. Bonds shot up in June when the Fed initiated a rate pause, but
then fell when minutes were released from the September meeting which showed a
lingering fear of inflation. After 3 consecutive holds, and more data
flowing in pointing to a slowing economy, some investors are beginning to bet
that the Fed will be forced to cut rates as early as March.

The dollar was little changed today, after the government
released its ISM report which showed a slowdown in manufacturing growth last
quarter. Yesterday the dollar fell to 3-week lows against the yen and
euro, after two economic reports also pointed to a slowdown in the economy.
The currency market has been dominated by interest rate and inflationary news,
and individual currency strength has been relying heavily on economic growth and
the prospects for rate hikes. The euro looks to be the strongest, with the
ECB set to raise rates again before the year is out. The BoJ has wavered
in its public statements concerning future hikes and economic growth, and more
reports are due out this week which could lead to future rate cuts in the U.S.

Crude oil futures rose 0.6% to close at 59.10 after the Energy
Department reported an unexpected decrease in gasoline inventories.
Despite the decline in gas, crude inventories are over 10% higher than the
5-year average, which kept a tight lid on the futures contract gains. OPEC
has warned of looming global production cuts, but has yet to present a unified
front or plan. Oil is down nearly 25% from its record July highs.
Natural gas rose 2.4% on cold weather forecasts and speculations from investors.

Gold rose 1.6% to close at $616.60 as traders hedged against a
falling dollar. Gold is commonly used as a hedge against a falling dollar
and rising oil; the dollar fell and oil rose today, so gold’s move did not come
as much of a surprise. Gold traded to nearly 2-month highs in today’s

Softs traded mixed to close the day. Cocoa fell 1.4%,
coffee rose 0.3%, orange juice fell 0.8% and sugar fell 0.4%.

Grains traded higher across the board. Corn rose nearly
4%, wheat rose nearly 1%, soy climbed 2.3% and oats rose 4%.

Meats traded mixed, with cattle up 0.4% and porkbellies down


Oil Inventories Rise; Gasoline Inventories Fall (full

Manufacturing Sector Growth Slows Unexpectedly In October (full

John Patrick Lee