Bonds Flat, Dollar Up on U.S. Data

U.S. 10-year Treasury bond prices were basically
flat on the day, recovering losses from earlier in the day. Bonds initially fell
this morning after 2 positive-growth economic reports were released this
morning, on bets that the Fed would not be forced to cut rates any time soon.
Bonds typically fall on positive economic news and rise on negative news, so
traders took the double reports as a good sign for the economy. However, as the
day went on, negative sentiment brought prices back up to near yesterday’s
close, securing a flat day for the bond markets.

The dollar bounced back against the euro
today, and rose to nearly 3-month highs against the yen, after positive
housing and industrial reports were released in the U.S. today. Both reports
beat expectations soundly, which boosted trader confidence in U.S. economic
strength, and forced traders to pare bets on any coming rate cuts. The dollar
rallied through the day on the positive news. The dollar also surged against
the Canadian dollar, which has held the upper hand over the dollar since the
beginning of March. The euro gave up gains against the yen, closing lower for
the day after hitting new record highs.

Crude oil futures fell about 1% today, after
the Energy Department reported an increase in U.S. crude and gasoline
supplies. Crude oil inventories rose 1.06 million barrels last week, the
highest increase since last June. Crude supplies are growing because
refineries across the country are shut down right now, being cleaned and
repaired ahead of a high-demand summer. Energy use usually increases during
the summer, sending prices higher on more demand. Natural gas futures rose
fractionally today.

Gold futures dropped nearly 2% today, as the
dollar surged against the euro on strong economic reports. Gold typically
trades inversely to the dollar and with oil; today’s dollar action dominated
gold trading today, as traders bought the dollar and sold gold. Copper futures
fell over 3% on Chinese demand worries.

Grains traded mixed today. Soybeans rose
nearly 2%, corn jumped about 1.3% and wheat fell around 1%.


U.S. housing starts grew unexpectedly in

Industrial production rose 0.7%, more than analyst expectations.

John Lee

Associate Editor