Bonds Slip Despite Sinking Dollar

U.S. 10-year Treasury bond prices fell today, after hitting new yearly highs
yesterday on general negative economic sentiment. Despite an overwhelmingly
negative economic outlook for the U.S., bonds merely took a breather today.
Prices are still very close to yearly highs, and any piece of news has the
potential to create new highs for those prices. 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 end of the year.

The dollar fell to new record lows versus the euro, on widespread speculation
that the Fed is set to cut rates again before the year is out. The Fed has
already cut the Fed funds rate twice so far this year, and a third cut would
probably signify deep, underlying weakness in the U.S., and send the dollar
lower. The dollar also fell against the yen today. The euro rose against the yen
as well. The dollar sank against the Canadian dollar, and also fell on the
British pound.

Crude oil futures rose 3%, reaching new all-time highs above $97 a barrel
today, after a suicide bomb Afghanistan further heightened Middle East worries.
Between Iran, Turkey, Afghanistan, Iraq and Pakistan, oil traders have a lot to
be worried about, and the rising prices are reacting to those fears. Any major
problems in the Middle East lead traders to worry about supply issues, and the
problems just seem to keep coming these days. $100 a barrel oil is almost a
done-deal, and traders don’t seem to see an end to the rally in the near future.
Natural gas futures fell just under 2%.

Gold futures kept pushing into decades-old highs today, gaining by 1.6%, on a
declining dollar and rising oil prices. Gold normally trades inversely to the
dollar and with crude oil, which is exactly what happened today. Traders bought
gold in the face of sky-rocketing oil prices and a plummeting dollar. Copper
futures were also up, by around 1.4%.

Grains were higher today. Soybeans were up 2.4%, while corn rose nearly 3%.

A choppy morning session was followed by a strong afternoon rally, which
saw the Dow rise by triple digits. Click

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