Bonds Rest on Quiet News Day

U.S. 10-year Treasury bonds fell back slightly today, despite overall
negative sentiment towards the U.S. The 10-year bond shot higher after the Fed
cut, and reached new yearly highs on Friday, on general expectations of more bad
news to come from the U.S. A combination of the housing and subprime lending
market worries have left many investors wary of U.S. economic strength. Bonds
typically rise on economic weakness and fall on strength, so it’s clear that
traders have taken a defensive position relative to bonds, heading into

The yen rose today, as traders continue to dwell on the coming subprime
write-downs. Last week, Citigroup announced of major write-downs in the
billions, and then fired its CEO. It is widely understood that even more
write-downs are to come. Traders bought back previously borrowed yen to cover
riskier positions in light of the newest developments, reversing the so-called
carry trade. The euro fell against the dollar as well, despite underlying dollar
weakness. The dollar fell on the Canadian dollar, but rose against the British

Crude oil futures fell about 1.7%, after developments in the Middle East led
to more relaxed tensions between Turkey and Iraq. Turkey has been threatening to
invade Iraq to deal with Kurdish rebels in the northern part of the country,
which helped to send crude prices to new records recently. Middle East problems
always present a “scare” situation for crude traders, who worry that major
fighting in the region could severely damage global supplies. Natural gas
futures fell nearly 5% on comfortable supply levels.

Gold futures inched higher, on underlying dollar weakness and rising crude
prices. Normally, gold moves inversely to the dollar and with crude oil, but
today, oil did neither. Instead, the underlying pressures from a weakening
dollar and oil prices helped to push gold prices higher, while both the dollar
and oil rested. Copper futures were down about 0.8%.

Grains were mixed today. Soybeans rose 0.3%, while corn fell 0.6%.

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