Bonds Ease on Factory Orders Report

U.S. 10-year Treasury bond prices fell today, after rallying yesterday. Bond prices dropped today, after separate inflationary reports pointed towards positive growth for the U.S. economy. A measure of bond risk dropped, and the Commerce Department factor orders report dropped less than forecast. Bonds usually fall on economic strength and rise on weakness, so traders took today's economic reports as a good thing for the U.S. economy.

The euro pulled back slightly today, on speculation that yesterday's euro run was overdone. The dollar also fell just slightly against the yen this morning, after conflicting reports out of the U.S. Housing numbers came in extremely weak, but other inflationary gauges pointed to growth and inflation. The July 4 holiday in the U.S. seems to have slowed the trading action for the day. The dollar gained over the Canadian dollar today.

Crude oil futures were fractionally higher today. Crude initially fell on speculation that U.S. refinery capacity can handle summer demand, but prices crept higher to close slightly up. Crude has been on the rise since May, with prices now settling above $70 easily. Natural gas futures were fractionally lower today.

Gold futures fell about 0.5% today, on speculation that the euro rally over the dollar is stalling. Gold usually trades inversely to the dollar and with oil; today's gold trading centered around speculation of coming dollar strength. Gold has also been trading closely with interest rates, as rising interest rates make the precious metal less attractive to safety investors.

Grains traded mixed today. Soybeans were up 5.7%, wheat was flat and corn dropped about 2.8%.

John Lee
Associate Editor
johnl@tradingmarkets.com