Bonds Retreat from Highs on Bernanke Comments

U.S. 10-year Treasury bond prices plummeted from 3-year highs today, after Fed chief Bernanke said that economic pressure and "downside risk" might lead to a rate cut later this month. Traders took this as full confirmation of a rate cut at the end of the month, and sold bonds accordingly. Bonds typically rally on economic weakness and fall on strength, so Bernanke's comments were clearly taken as a good thing for a weakened U.S. economy.

The euro surged against the dollar today, after the ECB kept rates at 4.0%, and ECB President Trichet said in comments that the ECB would not follow the U.S. Fed in cutting rates. The speech and rate cut decision rallied traders to buy the euro and sell the dollar, in line with the current overall trend. The dollar is close to all-time record lows versus the euro, as traders continue to worry about the struggling U.S. economy. The euro was basically flat against the dollar. The dollar plummeted against the yen, mostly on carry-over weakness from euro trading.

Crude oil futures fell about 1.7% today, on concerns that a slowing global economy will lead to a drop in crude demand. Traders took crude up to new all-time record highs just last week at $100 a barrel on demand worries, but traders sold oil today on overall economic concerns. Oil has pulled back in recent months on similar worries, only to move to new highs shortly thereafter. Natural gas was up moderately today.

Gold rallied today to fresh all-time records, as the dollar sank versus the euro. Gold normally trades inversely to the dollar and with oil prices, and today, traders focused on dollar weakness versus the euro and sold gold. Despite falling oil prices, a weakened dollar was enough to send traders scrambling for safety in the commodities. Copper futures fell for the second straight day on economic growth concerns.