Bonds Slide Despite Economic Concerns

U.S. 10-year Treasury bond prices fell today, after a government auction of $22 billion drew a higher yield than traders expected. Bonds have been wavering near 3-year highs following the expected rate cut which came two weeks ago. Bonds typically rise on economic weakness and fall on strength, so it's clear that traders have positioned themselves defensively in the face of U.S. economic weakness.

The dollar fell against the yen and the euro today, on worries that retail reports out this week will show major weakness for the U.S. U.S. retailer Target announced today that sales slowed considerably following the Thanksgiving holiday, and that slowdown could have wide-ranging effects on U.S. economic growth. The euro was near flat on the yen, as traders focused on dollar weakness.

Crude oil futures rallied 2% today, as Turkish planes attack Iraqi kurds and traders expect tomorrow's energy report to show a decline in energy reserves. Any political tension or event in the Middle East usually leads to a rise in crude prices, as that region is the world's primary exporter of crude oil. Traders pushed oil towards all-time record highs today on general political unrest, and expectations of high U.S. energy demand heading into the new year. Natural gas futures were up 0.3%.

Gold futures rallied over 1% today on dollar weakness and rising oil prices. Gold normally trades inversely to the dollar and with crude oil, which is exactly what happened today. Traders bought gold as a safety against both dollar weakness and rising oil prices. Copper future rallied about 0.5%.

Grains were higher across the board. Corn rallied 1.8%, while soybeans were up over 3%.