Bonds Higher on Credit, Equity Concerns
U.S. 10-year Treasury bond prices rose today, after Citigroup downgrades and
worries spread fears that the credit crisis is far from over. Bond prices fell
lower yesterday on rosy sentiment after the Fed cut interest rates, but the
fresh bad news from a major bank helped to reinforce credit worries. Bonds
typically rise on economic weakness and fall on strength, so traders took
today’s announcements as a bad sign of things to come.
The yen shot higher today, after credit worries in the US sent equities
lower. The yen has been trading inversely to the equity markets, as traders buy
and sell yen based on perceived risk in the broader markets. As stocks fall,
traders buy back borrowed yen, and as stocks rise, traders borrow yen to invest
in riskier assets. The dollar also rose against the euro, despite yesterday’s
rate cut. The dollar plummeted versus the Canadian dollar, but was flat on the British
pound.
Crude oil fell nearly 1% today, but not before hitting fresh record highs
above $96 a barrel. Crude prices have not stopped surging since the end of
September, when a summertime pullback led to a massive, record-setting rally.
Goldman Sachs has issued a letter to investors to take crude profits, but price
shows no real sign of changing directions.
Gold futures fell about 0.4%, as the dollar rose on the euro and oil prices
fell. Gold normally trades inversely to the dollar and with oil, which is
exactly what happened today. Traders sold gold in favor of a strong dollar, and
also on falling oil prices.
Grains were lower today. Soybeans and corn both fell around 1.8%.
Stocks tumbled on Thursday, with credit worries returning to the fore.
After cutting interest rates by 25 basis points yesterday, the Fed pumped $41
billion into the financial system today. Click
here to read the rest of today’s
Stock Market Recap.
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