Bonds, Gold Rise On Housing Data

U.S. 10-year Treasury bonds rose for the 3rd straight day
today, after a reports showed that durable goods orders were lower and new home
sales prices fell last month. Prices rose to the highest levels in two
weeks after the news was released, which is further confirmation that the
housing market is slowing. Bonds shot up in June when the Fed initiated
its rate-hold, and steadily climbed higher on speculation that the hold policy
would lead to rate cuts. Three weeks ago, September’s Fed meeting’s
minutes were released, which showed a lingering fear of inflation that led to a
drop in bond prices. However, yesterday’s hold and today’s economic data
point to an economy not worried about inflation, without the need for rate cuts.
Investors had begun to worry about rate cuts, but interest rate futures show a
nearly 100% chance that the Fed will not cut rates before the year is out.

The dollar fell the most in three months against the euro
today, and also declined against the yen, after a report showed that U.S. new
home prices declined last month the fastest since 1970. Investors have
been closely watching the housing reports, using them as a general indicator of
overall economic strength. The numbers did not sit well with currency
investors, who triggered a major slide in the dollar’s worth. The currency
market has been dominated lately by interest rates and economic growth, so the
housing numbers did much to undermine the dollar’s strength.

Crude oil futures fell 1.7% to close at $60.37 today, after
inventories for energies came in above 5-year averages yesterday. Oil has
fallen steadily since its record high in July, and OPEC has signaled for output
production cuts to curb the losses from the dramatic slide. Oil rallied
yesterday on signs that the OPEC reduction will go through, but there is still
much speculation as to the extent of a proposed cut. Natural gas futures
fell 1.5% on ample inventory supplies, ending a 2-day rally. Natural gas
has been on the rise lately as cold weather in the U.S. has prompted heavy
demand for the energy.

Gold rallied 1.5% today to counter the dollar’s fall.
Oil and gold have been trading lockstep, but today was different because U.S.
economic reports showed weakness in the dollar, which conversely sparked demand
for safe-haven buying in gold. Gold is down nearly 20% from May highs.
Copper traded basically flat; the housing report did not seem to affect this
market.

Softs traded mixed today. Cocoa was up %, coffee rose
0.7%, orange juice fell fractionally, and sugar fell 0.6%.

Grains traded mixed today. Corn was flat, wheat fell
1.7%, soy rose 0.9% and oats fell nearly 1%.

Meats traded higher today, with cattle up 0.28% and
porkbellies up nearly 3%.


Economic
News

Jobless Claims Increase In Line With Estimates (full
story
).

Durable Goods Orders Rise On Sharp Increase In Orders For
Transportation Equipment (full
story
).

John Patrick Lee