Bonds Sink on Jobs Number

U.S. 10-year Treasury bond prices fell the most this week in over a year,
after the U.S. released better than expected job growth numbers on Friday. The
non-farm payrolls report came in much stronger than what analysts were looking
for, prompting traders to sell bonds on speculation that inflation is rising.
Bond prices typically fall on strength and rise on weakness, so it’s clear that
traders took today’s report as a good sign for the future of the U.S. economy.
Bonds fell through May and much of June before bouncing on 11-month lows.

The dollar jumped against the yen, but fell on the euro after a positive
jobs report out of the U.S. Analysts were looking for a 125k gain in non-farm
payrolls in June, but the number actually came in at a 132k gain. The
unexpected jump in jobs added helped to boost U.S. sentiment against Japan,
but the euro remained dominant against the U.S. currency. The dollar managed
to scrap back some losses against the euro through the day. The euro moved to new highs against the Japanese yen. The dollar plummeted
against the Canadian dollar, despite the positive U.S. data.

Crude oil rose nearly 1% during today’s trading to a 10-month high, on
concerns that unrest in Nigeria could weaken global oil supplies. Oil trades
sensitively to any news of potential supply disruptions, such as reports of
Nigerian rebel attacks or Iranian confrontations. Oil has been rising fairly
steadily since the end of May. Natural gas futures fell 3.2% on comfortable

Gold rose 0.6% as the dollar fell against the euro. Gold normally trades
inversely to the dollar and with oil; today’s dollar weakness led to gold
buying. Gold has also been trading in sync with interest rates, whose high
rates are lessening demand for the safety metal. Copper futures rose
fractionally on South American strike threats.

Grains rose today. Soybeans gained about 0.9% and corn rose 2.7%.


U.S. non-farm payrolls gained 132k versus
expectations of 125k.

John Lee

Associate Editor