Bonds Down, Oil Up

U.S. 10-year Treasury bond prices fell for the first time in
five days today, after reaching seven-month highs yesterday. A consumer
confidence report showed a larger-than-forecast rebound from nine-month lows.
Bond yields have fallen steadily since June, when the Fed first decided to pause
rate hikes, and then plummeted further last week when the Fed continued the
pause. Numerous economic reports have shown the U.S. economy is slowing
down, which has spurred demand in the safety of long-term notes.

The dollar rallied sharply against the euro and the yen today,
after a U.S. economic report showed that consumer confidence increased more than
expected over the last month. A German consumer confidence report
yesterday sent the euro falling, after the report showed that the ECB might need
to worry about inflation less than once expected. Through the summer, the
yen, euro and dollar have all traded heavily on their respective prospects of
rate hikes, and the base overnight rate for each of the countries looks to
continue to be the single most important trading factor. The ECB has
repeatedly claimed the need for more hikes, the BoJ has wavered in its public
statements and the U.S. is looking at slim chances of a hike before the year is

Crude oil fell 0.6% to close at $61.11 on expectations that an
Energy Department report tomorrow will show that inventories for fuel supplies
have risen over the last week. Crude has steadily declined since the
beginning of August, as geopolitical tensions eased and investors priced in
larger-than-expected fuel reserves in the U.S. Iran continues to be
scrutinized for its nuclear program, and energy demand problems that could be
fueled by a confrontation with the country. Natural gas rallied off of
recent lows, to close up around 0.5% for the day.

Gold futures rose fractionally to close at $591.60 an ounce,
as oil struggled to maintain its ground. Oil and gold have been trading
hand-in-hand through the summer, as energy fears fueled demand for the safety of
the futures metal. Silver futures rose 1.6% on energy concerns as well,
and copper was up fractionally at the end of the day.

The softs traded mixed today. Cocoa was down 0.3%,
coffee was up 0.2%, orange juice was down 0.25% and sugar rallied strongly, up

Grains traded mostly higher for the day. Corn was up
1.6%, wheat was up 2.2%, soy was up fractionally and oats were up 0.6%.

Meats traded mixed fractionally, with cattle slightly up and
porkbellies slightly down.

Economic News

Consumer Confidence Sees Improvement In September (full

John Patrick Lee