Bonds, Oil Stall

U.S. 10-year Treasury bond prices were near flat
today, after spiking higher yesterday on a surprisingly weak home sales report.
Traders closely monitor housing reports for signs of broad economic strength or
weakness; housing problems were one of the main contributing factors of the U.S.
growth slowdown during the second half of 2006. Bond prices have been
trading within a fairly tight range since the end of February, and did not seem
to react to a weak consumer confidence report today.

The dollar fell against the yen and the euro
today, after a private report showed that consumer confidence fell this month.
Currency traders took this as a warning sign that the Fed could cut rates this
year, and sold the dollar in favor of other currencies. The yen has been a
major focus lately, as the ramifications of the carry trade played out on a
global equities selloff. The yen gained strength as traders bought the
Japanese currency to cover positions. The yen fell slightly against the

Crude oil rose fractionally today with little
change, on speculation that the Iran/UK tension will cool down soon. Crude
shot higher last week after Iran captured 15 British armed servicemen, which
caught the attention of oil traders worldwide. Geopolitical tensions with
Iran helped to send crude to record highs last July, as traders bet that a
full-scale war would lead to Iran removing its supply from the market.
Natural gas rose 3% on speculation that a hot summer this year will lead to more
fuel consumption.

Gold fell fractionally today, as oil prices also
stalled. Gold usually trades inversely to the dollar and with oil.
Dollar weakness did not drive gold higher today, but a lack of buying pressure
for oil pushed gold lower. Gold has also been trading in-line with global
equities recently; as the global equities markets sold off, traders dumped gold
positions to raise cash for protection.

Grains traded mixed today. Corn rose about
0.4%, wheat fell nearly 1% and soybeans dropped fractionally.


Consumer Confidence
came in weak today, 107.2 versus 108.5 consensus.

John Lee

Associate Editor