Bonds Hit Monthly Lows on Subprime Worries
U.S. 10-year Treasury bonds rose to their highest levels in over a month
today, on traders’ fears that the subprime mortgage fallout will spread to other
areas of the economy. Coupled with a staggeringly slow housing market, the
subprime fiasco could have the capability to do major damage to the U.S. economy
and investor confidence. Bonds fell through much of May and June on positive
sentiment and speculations, but recent housing reports and major subprime fund
blowouts are keeping traders closely focused on the negative. Bonds typically
rise on weakness and fall on strength, so bond traders have a negative outlook
right now, with prices over 1-month highs.
The dollar fell to new records against the euro, and also lost on the yen, on
rampant speculation that subprime mortgage losses will contribute massive damage
to U.S. economic growth and sustainability. The dollar has been falling to new
lows against the euro for about two weeks, and there is easy fix in sight.
Despite beating the dollar, the euro actually slipped against the yen. Equity
weakness has been leading to yen strength lately, as traders buy back borrowed
yen to cover riskier assets. The dollar was basically flat against the Canadian
dollar, but the dollar kept dropping against the British pound.
Crude futures fell about 0.6% today, after a number of refineries were
reopened across the midwest U.S. Traders bet today that with more refineries
producing gasoline, that gasoline stockpiles could grew and supply pressures
might ease. Crude moved higher this week, after a report on Wednesday showed
that U.S. gas stockpiles had dropped by over a million barrels, when traders
were looking for a major increase. Oil usually rises during the summer on
increased energy use and demand.
Gold futures rose 1% today, as the dollar hit new lows against the euro. Gold
normally trades inversely to the dollar and with oil; today’s gold action was
dominated by dollar weakness, as traders bought gold to hedge against the
dollar.
Grains fell today. Soybeans dropped 0.7% and corn dropped just over 1%.
Earnings misses from Google and
Caterpillar pulled
stocks sharply lower in Friday’s session. Google and Caterpillar both
finished today’s session down 5%.
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John Lee
Associate Editor
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