Bonds Ease on Housing, Durable Goods

U.S. 10-year Treasury bonds fell moderately
today, after a better than expected durable orders report. Traders sold
bonds in the face of economic strength, evidenced in greater spending by
companies. A new home sales report released later in the day showed the first
increase in new home sales in 3 months, although the number was less than what
analysts forecast. Bonds typically fall on economic strength and rise on
weakness, so it was clear that traders took today’s economic numbers as
positives for the U.S. economy. U.S. initial jobless claims are released
tomorrow, which will paint a clearer picture of the employment situation in the

The euro surged today against the dollar and the
yen, after a German IFO report showed that business confidence rose to its
second-highest level in history in April. The index came out at 108.6, versus
expectations of a rise to 107.9. The euro matched all-time record highs against
the dollars on the heels of the positive news, but gave up gains through the day
to close up only slightly. Despite a rosy durable goods orders report from
the U.S. and a jump in new home sales, the dollar fell against the euro, but
rose against the yen. UK GDP also grew more than expected, but the pound gave up
gains against the dollar and the euro to close basically flat. A Japanese trade
report showed that Japan’s trade surplus widened to a new record in March, up
74% from the year earlier. Exports to the U.S. grew at the slowest pace in over
2 years last month, while shipments to China and Europe actually grew. The yen
fell fractionally against the dollar, and lost more against the euro.

Crude oil rose nearly 2% today, after the
government reported that gasoline supplies fell to an 18-month low last week. Crude has been trading within a tight range in the mid-60’s for a few weeks now,
following a run-up on Iran/UK tensions. The latest Iran situation, in addition
to the Nigerian election concerns, highlights crude’s sensitivity to
geopolitical events. Natural gas futures were up about 1% today, as fuel
distributors continue to purchase the commodity ahead of the summer, usually a
period of high demand for all energy classes.

Gold prices closed with fractional change today.
Gold usually trades inversely to the dollar and with oil, but neither seemed to
dominate today’s trading. Traders tend to buy gold to cover dollar weakness and
rising oil prices; today, the dollar was near flat at the close, and oil rose on
gasoline supplies. Gold was content to just tread water today, however. Copper futures rose over 1% today, as stockpiles fell in New York, and durable
goods orders rose in March.

Grains all moved higher today. Soybeans rose
about 1.6%, wheat jumped over 5% and corn rose about 3%.


Durable good
orders rose 3.4% in the U.S. in March.

New home sales rose 2.6% in March, the first gain in 3 months.

John Lee

Associate Editor