Bonds Rally on Broad Market Worries
U.S. 10-year Treasury bond prices rose for the first time in a week today, on
general sentiments that the U.S. economy will slow growth over the next year. On
Tuesday, the Fed lowered 2 key interest rates, sparking concern that the economy
is headed for a recession. Bonds have risen steadily over the summer, on general
expectations for slowing growth and the ramifications of a weak housing market.
The credit crisis in August also helped to fuel fears that the overall economy
could be heading for a drastic slowdown. Bonds typically fall on economic
strength and rise on weakness, so it’s clear that traders have taken a mostly
defensive position in the midst of recent market developments.
The yen slumped against the dollar and the euro today, as traders re-entered
the carry trade on the recent market rally. The yen has been trading inversely
with the equity markets lately, as traders borrow yen to purchase risky assets
in a strong market. The dollar has also been under major pressure lately, after
the Fed cut rates this week to handle the housing market decline and credit
problems. Overall, it has been a very volatile week with lots of action. The
dollar also fell against the Canadian dollar and the British pound. The Canadian
dollar is currently worth more than the U.S. dollar for the first time since the
70’s.
Crude oil futures fell back slightly today from record highs, without any
real reason to. Crude futures have been surging over the past week on
speculation that Q4 demand will outpace supply. OPEC also increased global
production last week in an effort to stall a major price move. Crude recently
hit new highs after falling 10% in about half a month. Natural gas futures were
up about 1% today.
Gold fell fractionally today, in line with a dollar rest and a crude decline.
Gold normally trades inversely to the dollar and with oil, which is exactly what
happened today. After hitting decades-old highs this week, gold took a break
today. In line with gold, copper futures were down slightly.
Grain was mixed today. Soybeans fell about 1%, and corn jumped over 2%.
Stocks closed higher on Friday, after strong earnings from both Oracle
and Nike. Earlier today, Texas Instruments announced a $5 billion
stock buyback program and plans to raise its quarterly cash dividend by 25%.
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