Bonds Inch Lower on Rate Cuts

U.S. 10-year Treasury bond prices fell further off yearly highs, after the
Federal Reserve cut both the discount rate and the federal funds rate by 50 bps
each. The move signals the Fed’s desire to contain negative economic effects
stemming from housing and credit weakness. Bonds typically fall on economic
strength and rise on weakness, so today’s move by the Fed was taken as a
positive for the future of the U.S. economy.

The dollar sank versus the euro, but surged against the yen, after the Fed
cut rates by 50 bps, to stem economic pressures from a struggling housing market
and alarming credit problems. Traders were fully expecting a cut, and the dollar
plummeted versus the euro as soon as the news was announced. With lower lending
rates, traders will probably be looking to borrow the dollar now, and many are
calling for a free-fall move by the dollar in the months to come.

Crude oil futures rose over 1% on the rate cut, and also on expectations of a
supply drop which could be reported tomorrow. Crude futures jumped today on
expectations that the rate cut will fuel economic growth and crude demand. Crude
fell 10% in August on growth demand worries, but has since rebounded and hit new
highs. Natural gas futures were down about 1.7% for the day.

Gold futures rose about 0.7% on dollar weakness to 28-year highs. Gold
normally trades inversely to the dollar. Today, traders bought gold on dollar
weakness and expectations that the dollar could continue to fall well into the
future. Oil also helped prop up gold prices. Copper futures rose over 1% on
positive growth sentiments.

Grains were mixed, but flat. Soybeans rose fractionally, while corn slipped

The waiting is over…the Federal Reserve lowered interest rates by 50bp,
the first cut since 2003. The move was somewhat surprising, especially
considering recent public pronouncements by Ben Bernanke, the Fed Chairman. Both
the Federal Funds and Discount Rate were lowered by 50bp, the discount rate was
lowered by 50bp last month too. Click

to read the rest of today’s

Stock Market Recap

Economic News

The U.S. Federal Reserve cut both the
federal funds rate and the discount lending rate by 50 basis points.