Yields Continue To Rise, Oil Rebounds

U.S. 10-year Treasury bond yields extended declines to reach
new 7-month lows, after a government report showed that previously-owned home
sales declined during the last month. Bond prices have soared since the
Fed decided to keep rates at 5.25% during June’s meeting, and shot even higher
after last Wednesday’s meeting, when the Fed again chose to keep rates the same.
Investors have sought safety in the long-term rates, in the face of more and
more reports that are showing a slowing U.S. economy.

The euro fell sharply against the dollar and the yen today,
after a German report showed that consumer prices fell for the second straight
month. That inflation report shows that inflation should be less of a
worry than once thought, which reduces the chance that the ECB will raise rates
before the year is out. The yen held its ground today against the dollar,
but looks poised to fall to 20-year lows as global investors remain prepared to
sell. Low interest rates in Japan look to be the main focus of negative
attention, and the BoJ has been faced with recent economic reports that look to
keep the rates at the same levels.

Crude oil futures rose 1.4% to close at $61.40, moving up off
of recent 6-month lows. Crude oil has fallen over 20% since recording new
highs in July, in the midst of a a tense geopolitical scene spurring on broad
supply fears. With a cooling geopolitical scene and ample inventories, oil
has been on a serious slide since the end of August. Natural gas fell 3.2%
to close at 3-year lows as mild weather forecasts keep the energy demand down.

Gold futures rose fractionally, erasing early losses, as a
rise in crude prompted interest in the safe-haven metal. Oil and gold
traded lock-step all summer, and look to continue to do so for some time into
the future. Silver also rose slightly today, while copper fell on housing
worries in the U.S.

Softs traded mixed today. Cocoa fell 0.4%, coffee rose
2% and orange juice rose 0.3%. Sugar lost heavily today, down 6.7%.

Grains traded mostly lower today. Corn fell 0.2%, wheat
fell 1.25%, soy fell 0.7% and oats fell 0.8%.


Existing Home Sales Show Modest Decline In August (full

John Patrick Lee