Investors Nervous As Italian Bond Yields Rise To Record Level

November 9, 2011 12:03 AM

What Traders are Talking About:

* Italian bonds hit record yields, investors run from risk. Italian bonds rose to "crisis" levels overnight, touching off a broad-based move toward risk aversion in the investment world. The U.S. dollar index is sharply higher, while most commodities are under pressure, as a result. Italian Prime Minister Silvio Berlusconi's promise to resign failed to spark investor confidence as Italian bonds are at unsustainable levels and there's little confidence the country will pass needed economic reform.

The long and short of it: With outside markets highly price-negative overnight, it will be hard for grain and soy futures to strengthen even if USDA delivers bullish report data this morning.

* Chinese inflation eased in October. China's October consumer price index rose 5.5% year-over-year, which was right in line with expectations. But the rate of inflation declined from 6.1% in September and has now dropped three consecutive months. The food price component of the index was up 11.9% from a year earlier, compared to a 13.4% increase in September. Meanwhile, China's producer price index rose 5.0% annually last month compared to a 6.5% increase in September.

The long and short of it: Moderating inflation and slowing economic growth has many believing China's next move will be to start gradually easing monetary policy, although a cut in interest rates is not likely on the immediate horizon.

* Brazil gov't raises corn crop forecast, lowers soy peg. Conab, the supply agency of the Brazilian government, lowered its soybean crop forecast to 71.48 MMT to 72.96 MMT from its initial peg of 72.18 MMT to 73.29 MMT in October. The corn crop is now forecast at 58.42 MMT to 59.45 MMT, up from 57.32 MMT to 58.98 MMT last month.

The long and short of it: Conab remains very conservative with its 2011-12 corn and soybean crop projections compared to most private firms. For comparison, Pro Farmer South American consultant Dr. Michael Cordonnier pegs the Brazilian soybean crop at 75.0 MMT and the corn crop at 63.0 MMT.


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