Bonds Up on Mortgage Worries

U.S. 10-year Treasury bond prices rose today, on speculation that the
mortgage-lending fallout has not yet extended full-force. Bonds fell on Friday
on positive sentiments after a comfortable jobs report, but today, prices jumped
from those lows. Bonds normally fall on positive sentiment and rise on weakness,
so traders took today’s market dynamics as a negative sign for the future, and
bond prices rose in accordance.

The major currencies were basically flat today, after the euro hit new highs
against the yen early in the day. With no economic data coming out today, the
U.S. dollar up slightly on the euro and flat on the yen. The dollar managed to
close slightly lower against the Canadian dollar, recovering from moderate
losses. The dollar also lost against the British pound, after mixed data from
the U.K. Traders were said to be anticipating a speech on inflation by Fed Chief
Ben Bernanke tomorrow.

Crude oil fell about 1% today, on speculation that unexpected refinery
shutdowns will lead to lower demand levels in the U.S. Crude has been rising
steadily since the end of May, on widespread speculation that the summer months
will bring higher levels of demand and rising prices. With the unexpected
shutdown of a number of major refineries in the mid-West, some traders took that
as a sign that demand will be on the low-end of the spectrum. Prices fell
accordingly. Natural gas futures fell fractionally on weather forecasts for a
cool front across the northern U.S.

Gold futures rose over 1% today, on speculation that the dollar is set to
weaken after Bernanke’s comments to come tomorrow. Gold usually moves inversely
to the dollar and with oil; today’s gold action was dominated by dollar weakness
speculations. Gold has also been trading in sync with interest rates, with high
interest rates leading to lower gold prices. Copper futures rose 1.7% after
workers went on strike in Chile.

Grains traded mixed today. Wheat fell 1.6%, corn dropped 0.7% and soybeans
rose 0.7%.


No major news to report for the U.S. today.

John Lee

Associate Editor