Bonds Rise On Fed Minutes

U.S. 10-year Treasury notes rose today, after minutes from
from October’s meeting showed that 11 of 12 Fed board members voted to keep the
rates unchanged, illuminating a deep Fed conviction that there is no
inflationary pressure at this time. Bonds shot up in June when the Fed
initiated a rate-pause, on the grounds that the U.S. economy is experiencing a
significant slowdown, and that inflationary pressures are easing. Bonds
have wavered near 7-month highs as conflicting reports and comments continue to
pour in. Negative economic news usually sends bonds higher, as investors
look for safety in the long-term note, while positive news is usually met with a
steep drop in bond prices.

The yen traded near all-time lows against the euro, and gained
moderately against the dollar, after BoJ meeting minutes released today did not
show an aggressive anti-inflation stance. Instead, the BoJ’s comments
highlighted raising rates “gradually,” and also said that the economy is
expanding “moderately.” Interest rate and inflationary news has dominated
currency trading, as growing, inflationary economies continue to be seen as the
best global currency investments. The ECB has basically guaranteed rate
hikes before the year is out, while the U.S. and Japan have now both hinted that
the possibility of rate hikes during this year is slim to none.

Crude oil rose over 2% to close over $60 a barrel today, after
demand worries stemming from pipeline troubles and a closed-down oil rig in the
North Sea. Oil has fallen 25% since recording record highs during a tense
war between Israel and Lebanon over the summer. OPEC has called for an
international output reduction, and has seen limited participation that has yet
to produce any sustainable effect on the plummeting prices. Today’s move
higher could be seen in terms of investors taking advantage of the low price and
supply fears. Natural gas fell a half of one percent, as forecasts
continue to predict warm weather across the Northern U.S.

Gold futures rose just over 1% today, as crude supply fears
prompted safe-haven buying the commodities metal. Gold has been trading
heavily in-line with oil for some time, and also inversely against the dollar.
Traders turn to the metal to hedge against inflation and high energy prices, so
oil’s move higher led to buying in gold. Gold is down 20% from May highs.
Copper rose the most in five weeks, up 2.6%, after inventories declined and a
Swiss mining company predicted a bullish decade for all commodities.

Wheat rose 1% on news that South Africa’s production will drop
over 1% this year due to late rain. Soy rose over 1%, oats were
fractionally lower, and corn rose nearly 0.5%.

Economic News

No major economic news to report today.

John Patrick Lee