Bonds Continue To Rise
U.S 10-year Treasury notes continued to rise today, on a
projected weak economy and less government spending in a
Democratically-controlled Congress. Bonds shot up in June when the Fed
initiated a rate-pause to combat the effects of a slowing economy.
Inflationary worries popped up in the September meeting’s minutes, which caused
bonds to fall, but then reversed on continued weak numbers and warnings of
moderating inflation. Bond prices continue to look bullish, as a slowing
economy lessens inflationary pressure, which could lead to rate cuts in 2007.
The dollar was little changed today, hovering near six-week
lows against the euro, on speculation that a Democratically-controlled congress
would limit government spending. Currency markets have been dominated by
interest rate and inflationary news, with hot-growth and high inflation boosting
individual currencies. Japan has signaled a hawkish position against
interest rates, and the ECB has also publicly announced a vigilant position
against inflation. With weak economic reports trickling out of the U.S.,
some investors are beginning to price in rate-cuts sometime during the next
year.
Crude oil futures rose 1.7% to close just under $60 a barrel
today, after inventories released today showed that gasoline supplies have
steadily fallen for 4 weeks straight. Despite the low inventory numbers,
crude supplies are still well above their 5-year average. Crude has fallen
steadily, nearly 25%, from its July highs, recorded during a tense war in
Lebanon and North Korean missile tests. OPEC has signaled for a cut in
global production, but has been unable to present a unified approach to the
cuts. Natural gas rose nearly 1% as meteorologists predicted a cold front
on the way for the Northern U.S.
Gold futures fell 1.5%, the most in two weeks, as investors
locked in gains from the 8.8% 4-week gold rally. Gold moves inversely with
the dollar and in-step with oil, as the metal is used as a hedge against
inflation and rising oil prices. Copper futures fell 3.1% on major supply
gains.
Softs traded higher across the board. Cocoa rose 0.8%,
coffee was up 2.5%, orange juice rose 0.2% and sugar rose 3.2%.
Grains traded higher today. Corn rose 1.9%, wheat rose
1.4%, soy was up 1.7% and oats rose 2.2%.
Oil Inventories Rise Again (full
story).
John Patrick Lee