Bonds Extend Slide on Rate Cut Expectations, Jobs

U.S. 10-year Treasury notes continued to fall today, extended losses after
hitting yearly highs just last week. Bonds rose consistently from July through
August, on worries that the U.S. credit crisis would trigger an overall economic
slowdown. However, a positive jobs report today helped to push bonds lower, in
addition to the fact that basically everyone is expecting the Fed to cut rates
next week. Bonds typically rise on economic weakness and fall on strength, so
traders seem to be relaxing ultra-defensive bond bets.

The yen plummeted against the euro and the dollar today, on speculation
recent political turmoil will cancel any possibilities for a rate hike this
year. The Prime Minister of Japan resigned yesterday, and according to some
traders, political unrest in Japan has historically meant that the BoJ won’t
change rates. The dollar has been under major pressure in the last weeks ahead
of the Fed meeting; with an almost guaranteed rate cut on the way, many traders
are taking positions against the dollar on overall slowing growth and credit
exposure. The dollar was slightly up versus the euro.

Crude oil continued to climb today, inching into new record territories.
Crude oil fell about 10% in early August, only to completely recover those
losses during the latter half of the month. Traders are worried that current
crude supplies and global production rates will not be able to handle heavy U.S.
demand projected for Q4. Natural gas futures fell nearly 6% after an unexpected
increase in gas reserves.

Gold futures fell slightly today after the dollar held up versus the euro
today. Gold normally trades inversely to the dollar and with oil, and it was
dollar strength speculation that helped to push gold futures slightly lower.
Copper futures were up over 1% on positive economic growth sentiments.

Grains were mixed. Soybeans rose about 0.4%, while corn fell 2.5%.

Stocks closed higher on Thursday, as weekly jobless claims rose less than
expected and some positive stock news helped to raise investor sentiment. Click

to read the rest of today’s

Stock Market Recap

Economic News

The U.S. budget deficit grew to $117
billion, more than forecast.