Bonds Fall to 9-Month Lows

U.S. 10-year Treasury bonds fell to 9-month lows
today, after two major U.S. economic reports pointed to economic growth and
stability. The ISM report index rose to 55 last month, versus expectations of
54. Non-farm payrolls also increased more than expected, gaining 157,000 jobs in
May, versus a consensus of 132,000. Bonds have been falling steadily since the
beginning of May, when the Fed held rates, and emphasized hawkish views about
monitoring inflation. Rate cuts are looking less and less viable as the year
progresses, but traders will be closely monitoring the housing market for
confirmation of an overall turnaround.

The dollar surged to 4-month highs over the
yen, and also continued pushing against the euro, after more reports were
released in the U.S. today that pointed to strong growth. The strength of the
two reports combined has help to fuel the dollar rally further. As the day
progressed, the dollar gave up a lot of the gains made early in the day
against the euro; underlying euro strength seemed to push the dollar lower.
The euro also crept higher against the yen, pushing towards a new record high.
The U.S. dollar has been rallying since the beginning of May, on a string of
turn-around reports and hawkish Fed wording. The dollar had been trading near
record lows against the euro, and many investors were forecasting rate cuts by
the end of the year. The Canadian dollar is the only currency that has been
able to totally ignore U.S. strength, and continues to push the dollar to new

Crude oil futures rose about 1.6% today, on
signs that refineries are not producing enough gasoline to prepare for the
summer surge of demand. Summer is typically a period of high demand for
energy, and prices usually go on the rise. Traders are betting that U.S.
reserve supplies will not be able to handle the extra load this summer, which
is sending prices higher. Natural gas futures fell 0.7% on comfortable supply

Gold futures rose 1.5% today, after the ECB
said it plans to not sell any more gold until September. Prices jumped on
worry that more banks will follow suit, and there will be a gold drought on
the market. Copper futures rose fractionally today, but secured gains for the

Grains traded mixed today. Soybeans rose 1.4%,
wheat gained 0.9% and corn fell about 1%.


ISM index rose to
55, versus expectations of 54.

payrolls gained 157,000 jobs in May, more than expected.

John Lee

Associate Editor