Bonds Fall Despite Weak Data

U.S. 10-year Treasury bond prices fell
fractionally today, despite an unexpected drop in existing home sales last
month. Despite today’s weak numbers from the housing sector, a separate housing
report this week showed that new home purchases grew the most in 14 years last
month. Bonds have fallen steadily since the Fed kept rates at 5.25% just over 2
weeks ago, and emphasized continued vigilance over inflation. Bond prices
typically fall on economic strength and rise on weakness, so despite today’s
weak housing numbers, traders have a positive outlook on the U.S. economy right

The dollar fell against the euro today, but
rose against the yen. U.S. existing home sales declined in April, which led
traders to sell the dollar on growth fears. The housing market has been a key
indicator for the U.S. for the past years; a positive housing report earlier
this week helped to boost the dollar on the international market. Traders bet
that housing weakness could lead to further dollar weakness, although it
seemed like there was less worry against the Japanese currency. The dollar
moved lower against the Canadian dollar, and also fell slightly against the
British pound. The euro fell against the yen during the morning, but recovered
and is now trading higher.

Crude oil futures rose about 1.6% today, on
speculation that yesterday’s price drop was over-extended. Yesterday, prices
fell dramatically on speculation that the recent lull in refinery activity has
created major supply gluts at key locations in the U.S. Today, a group of
Western oil workers were kidnapped by terrorist in Nigeria, which produces a
significant percentage of the world’s supply. Natural gas futures were little
changed today, as mild weather remains across most of the U.S.

Gold futures rose slightly today, as the dollar
weakened against the euro. Gold usually trades inversely to the dollar and
with oil; today’s dollar weakness led to gold buying. Copper jumped over 4%
today on falling supplies in China.

Grains traded mostly lower today. Soybeans fell
0.4%, corn dropped over 2% and wheat was up fractionally.


Existing home
sales fell to lowest levels in 4 years last month.

John Lee

Associate Editor