Bonds Rise On GDP Numbers

U.S. 10-year Treasury bonds rose to a 3-week high today, after
GDP numbers released by the government showed that the economy grew the slowest
in 3 years last quarter. The Fed held rates at 5.25% on Wednesday, and
said that inflation should moderate in the future. Bond prices shot up
subsequently, and the housing numbers yesterday confirmed that the economy is
slowing, sending prices even higher. The GDP numbers today further cement
the notion that the economy is slowing, lessening the need for anti-inflationary
rate hikes. This led to demand in the safety of the long-term notes,
sending the 10-year bond higher.

The dollar fell against the euro and the yen today, after a
GDP report showed that economic growth in the U.S. slowed last quarter.
The dollar has slid against the major currencies for three straight days
following the Fed announcement, which was a “hold.” The currencies market
has been dominated by interest rate and inflationary news; this recent move is
no exception, and is rooted in a slowing U.S. economy that has no need to raise

Crude oil futures rose 0.7% to close at $60.75 on investor
speculation that cold weather forecasts will increase demand for all energy
supplies. Crude is down nearly 25% from its July highs, so much so that
OPEC has warned investors of a looming global supply cut. However, OPEC
has shown little solidarity among its members as to how, when and how much oil
will be removed from the market. Natural gas futures fell 0.4% on record
inventories, despite forecasts for cold weather in the Northern U.S.
Natural gas usually rises when cold weather is on the way, but ample supplies
forced prices lower today.

Gold futures rose 0.2% on continued dollar weakness, as
investors sought safety away from the plummeting currency. Investors turn
to gold in the face of currency instability and rising oil, which is what
happened today. Copper rose slightly today, but is expected to fall next
week on an increase in supply size.

Softs traded mixed today. Cocoa fell 1.2%, coffee rose
0.4%, orange juice rose 0.2% and sugar fell 0.25%.

Grains traded higher across the board. Corn was up 1.6%,
wheat was up 0.2%, soy rose 1.2% and oats rose 2.5%.

Meats fell, with cattle down 1.3% and porkbellies down 0.1%.


Q3 GDP Advance
– Up 1.6%.

John Patrick Lee