Bonds Up on Equity Concerns

U.S. 10-year Treasury bond prices shot higher today, boosted by equity weakness and fears of more negative credit news to come. Bonds have been trading steadily higher since the beginning of July, when the subprime problems became more widespread credit worries, and the equity markets began falling. Bonds typically rise on economic weakness and fall on strength, so traders are taking a defensive stance into the notoriously weak month of September.

The yen rose across the board today, as global equity markets fell, and traders reversed the carry trade to cover losses. The yen surged against both the dollar and the euro, with traders worried that new credit problems could arise any day. The euro rose against the dollar today. Lately, the yen has been trading inversely with global equity markets, on the carry trade dynamic. In general, global equity markets have had a large hand in directing currency movements over the past few weeks.

Crude oil prices rose about 0.6%, on worries that tomorrow's Energy Department report will show a decline in gasoline and crude reserves. Crude fell nearly 10% for 2 weeks at the beginning of August, but prices have since crept up and nearly regained all lost ground. Crude fell during the "credit crisis" on worries that a full-blown economic recession would equate to much less energy demand and usage. Natural gas futures jumped over 3% today.

Gold futures fell fractionally today, on speculation that global equity weakness will lead to slower demand for the safety metal. Gold has been effected in the past by major equity weakness, which has led to gold selling to cover other losses. Copper fell over 1% on similar demand worries.

Grains fell today. Soybeans were down over 0.5%, and corn fell 2%.

Stocks declined on Wednesday, after very disappointing home sales data. The National Association of Realtors' index of pending home sales fell 16.1% from a year ago and 12.2% from the month before. It was the second-lowest reading ever and the lowest since Sep 01. Click here to read the rest of today' s Stock Market Recap.

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