Bonds Jump, Dollar Falls on Data

U.S. 10-year Treasury bond prices rose to a 3-week high today, after the U.S.
released disappointing home sales data and a weak consumer confidence report.
Bonds moved higher yesterday as traders anticipated weakness, and the reports
bore those fears to light. Bonds typically fall on economic strength and
rise on weakness, so traders took the soft confidence and home reports as a big
negative for the economy; traders looked for safety in the long-term bonds,
sending prices higher and the yield lower. Preliminary GDP numbers come
out later this week, in addition to initial jobless claims, so there is some more
price-moving data on the way.

The dollar fell today against the euro and the
yen, after a disappointing home sales report. Analysts were expecting a 4.3%
decline in existing home sales, but the figure actually came in at an 8.4%
decline in March. The dollar came within a fraction of record lows against the
euro, catching support at crucial levels. The dollar also weakened after the
Conference Board announced the consumer confidence index from April, which
fell to 104.0 this month from 108.2 in March. Analysts blamed higher gas
prices and a struggling housing sector for the weak numbers, which hurt the
dollar on the global currencies market. The currencies market favors
positive-growth, inflationary economies, which puts the U.S. and Japan at a
disadvantage against the consistently rosy European economy.

Crude oil futures fell over 2%, nearly erasing
all gains from yesterday’s rally. Oil jumped higher yesterday, as
traders feared that the elections in Nigeria could lead to conflict and an oil
supply disruption. However, after no major reports of violence, traders
felt better about the situation and sold oil as a result. Crude has been
very sensitive to geopolitical events yesterday, considering this recent
Nigeria spike, and the latest geopolitical run-up associated with Iran.
Natural gas futures rose about 0.4% today, as traders bought on anticipation
of increased summer demand.

Gold fell about 1% today, in line with oil.
Gold futures usually trade inversely to the dollar and with oil; today’s oil
action dominated gold trading, as traders sold gold in the face of falling oil
prices. Copper futures fell over 2% on the disappointing home sales
number released today.

Grains traded mixed today. Soybeans fell
about 1.5%, wheat fell just over 2% and corn jumped over 2%.


Existing home
sales fell 8.4% in March to lowest levels in nearly 4 years.

Consumer confidence fell to 104 from 108.2.

John Lee

Associate Editor