Oil Rebounds From Lows, Bonds Ease Back From Highs

U.S. 10-year Treasury bond yields remain near 7-month lows,
after a report was released today that showed new home sales increased within
expectations in August. Yields hit 7-month lows on Friday, after the Fed
decided not to raise rates for two straight sessions in a row last week.
Multiple economic reports have shown that the U.S. economy is slowing down, and
some investors are even pricing in a rate cut before the year is out.
Investors are seeking the safety of the long-term note to fight against the
worries of a slowing economy, sending the price of bonds higher.

The dollar rallied against the yen for the fourth straight day
after a U.S. economic report showed that new home sales rose last month.
Although the report boosted the dollar against the yen, the euro gained
moderately against the dollar. The dollar, yen and euro have all been
trading heavily around interest rates through the summer, as central banks seek
to find a balanced solution to contain inflation and fuel growth. The yen
is trading near historic lows, as the country’s prospects of a rate hike remain
grim. The ECB has repeatedly stated its intent to raise rates, while the
U.S. prospects to raise rates look slim.

Crude oil futures rose 3.2% to close at $62.96 a barrel after
crude failed to hold levels below $60. Investors who were bearish on
crude, hoping it to go below $60, were forced to reverse their positions today,
driving the futures contract up from recent lows. Natural gas fell 7.2% to
reach 4-year lows as mild weather and ample inventories drove supply fears down.

Gold rallied 1.1% to close at $603.30 an ounce, on
speculations that the holiday season of ’06 will create a significant spike in
demand. The rally in oil also helped to boost gold, which has been trading
hand-in-hand with the energy contract for some time now. Copper rose
moderately during today’s trading.

Softs traded moderately with little change today. Cocoa
was up 0.9%, coffee traded flat, orange juice was up 0.3% and sugar fell 0.4%.

Grains traded mixed today. Corn fell 2%, wheat rose
0.3%, soy fell 0.8% and oats rose 0.87%.

Meats traded mixed, with cattle down 0.15% and porkbellies up


Oil Inventories Edge Down, Gasoline Stockpiles Rise Sharply (full

New Home Sales Increase In August Compared To Revised July
Level (full

John Patrick Lee