Bonds Hit 2-Year Highs on Subprime Losses
U.S. 10-year Treasury bond prices hit 2-year highs today, on worries about
unannounced losses stemming from the subprime sector. Today, Goldman Sachs
reported that Citigroup subprime losses could reach $15 billion, exacerbating
investor worries about the strength of the U.S. economy. Bonds have been
rallying strongly through the summer, on general anxieties surrounding the
housing crunch and credit crisis. Bonds typically rise on economic weakness and
fall on strength, so traders have positioned themselves very defensively in
relation to bonds.
The yen rose today, mostly on feelings of unease in the global equity
markets. The so-called carry trade has dominated yen action in the past months,
as traders buy and sell yen based on perceived market risk. In risky markets,
traders buy back previously borrowed yen, to cover riskier positions. The yen,
then, has been rallying on global equity weakness and falling on strength. The dollar was basically flat against the euro, but still very close to
Crude was near flat today, after OPEC left global production levels unchanged
over a weekend meeting. Crude has hit all-time records nearly touching $100 a
barrel in the past 2 weeks, on global concerns that demand is outpacing supply.
Traders have also been buying oil on Middle East tensions. Natural gas futures
fell over 2% today.
Gold futures fell about 1% today, despite a falling dollar. Gold normally
trades inversely to the dollar and with crude oil. Today, gold seemed to ignore
a falling dollar, and dropped as crude held its ground. Gold basically moved on
its own, against the normal trend. Copper futures fell over 5% in today’s
Grains were lower today. Soybeans fell 0.6%, while corn dropped nearly 0.5%.