Bonds, Yen Slip on Equities Bounce

U.S. 10-year Treasuries fell today, in line with
a global equities rebound, following a major slide that started last week.
Bond prices moved higher as the global markets sagged, as investors left the
instability of the international equities market in favor of the safety of
longer-term bonds. Bond prices usually rise on economic weakness and fall
on strength, but for the last week, bond prices have been closely tied to the
stock market. The perceived risk of owning company debt also fell, an
indication of strength for the economy. Investors will probably remain
focused on key housing and manufacturing reports into the near future; traders
often use the housing market as a broad proxy of the health of the economy.

The yen fell against the dollar and the euro for
the first time in four days today, on a rebound of the global equities market.
The yen surged as international markets fell, as nervous traders unwound yen
carry trades to avoid losses in stocks. The yen has been under major
pressure lately, having reached record lows against the euro and yearly lows
against the dollar, before this recent pop. The international currency
market has favored currencies backed by inflationary, positive-growth economies
with a pressing need to raise interest rates. Europe has proven that more
rate hikes will be needed this year, which has helped the euro move strongly
against the dollar and the yen. The dollar hit yearly lows against the
euro at the end of last year, and is trading near that range.

Crude oil futures rose about 1% today, as cold
weather hit the Northeastern U.S., which comprises a vast majority of the
heating fuel consumption in the U.S. Crude oil has been trading in a tight
range just above $60 a barrel for a little over a week, after breaking through
and holding that critical level. Oil fell over 30% from record July highs
before bouncing in mid-January on winter’s arrival. Cold weather usually
equates to higher prices, as more fuel is needed to heat homes. Natural
gas rose nearly 3% on similar weather demands.

Gold rose over 1% today, as prices bounced back
from a 7% slide stemming from the global equities slide. Gold fell rapidly
with the global markets, as traders liquidated all asset classes in favor of
holding cash during major weakness. Gold usually moves inversely to the
dollar and with oil, but lately, the global selloff was the most important
factor in gold’s decline. Copper bounced over 1% today, moving higher with

Grains fell across the board. Corn fell
1.4%, wheat fell 1.6% and soybeans fell about 0.5%.


Q4 worker
productivity was revised lower today to 1.6%, down from 3% originally

Factory orders fell 5.6% in

John Lee

Associate Editor