Bonds Fall On Fed Minutes, NY Fed Report

U.S. 10-year Treasury notes fell today, after a New York Fed
report came in better than expected, and the minutes from the Fed’s October
meeting were released, which were highlighted by a continued vigilance against
inflation. The New York Fed’s general economic index rose to its highest
levels since June in the report released today, which casts doubt on broad
speculation that the U.S. economy is drastically slowing, necessitating a
rate-cut. The minutes from the Fed meeting also helped to push notes
lower, as a Fed geared towards keeping inflation down would use high interest
rates to control the economy. Bonds shot up in June when the Fed initiated
a rate-pause, but have wavered recently on conflicting reports and announcements
from the Fed.

The dollar rallied against the yen, but fell fractionally
against the euro today, after minutes from October’s Fed meeting showed that the
U.S. central bank remains tightly focused on inflation. A hawkish Fed
would raise rates if necessary, and certainly push to keep from lower rates.
The New York Fed report also helped to push the dollar higher against the yen,
as it showed an unexpected jump from last month. The currencies market has
been dominated by interest rate and inflationary news, as signs of economic
growth and inflation trigger buying in that country’s currency. The U.S.
looks set to keep rates at 5.25%, but the ECB and BoJ have both stated that
rate-hikes are probable before the year is out.

Crude oil futures rose 0.8% to close at $58.76, after U.S.
stockpiles showed a slide last week after refineries unexpectedly lowered their
output. Crude has been on a slide since reaching record highs in July of
this year, falling nearly 25% from the record. OPEC has begun to initiate
production cuts from its member countries, with a goal of reducing global output
by around 1 million barrels a day. Natural gas rose 1.8% as traders
continue to take advantage of low prices, and on speculation that the coming
winter months will significantly boost demand for the energy.

Gold fell fractionally today for the 4th session in a row, as
investors continue to turn to equities to look for profit. With the Dow at
all-time high levels, and the S&P at multi-year highs, investors are continuing
to reap the rewards of a booming equities market. Copper prices fell 0.3%
on speculation that high global inventories and potentially slowing global
economies will lessen demand for the metal, which is commonly used to build
houses and buildings.

Grains and softs traded mixed today. Corn rose to a
one-week high on speculations of higher demand for grain and cattle. Sugar
fell fractionally on speculation of increased supplies from across the globe.
Coffee rose 1.9% to a 9-month high today, on fears that a dry spell in Brazil
will heavily affect supplies from Brazil.

Economic News

Minutes from October’s Fed meeting highlight a board
hyper-concerned about inflation.

The Fed Bank of New York rose to its highest levels in June,
an unexpected positive sign for the U.S. economy.

John Patrick Lee