Bloomberg – Commodities markets are heading for the biggest annual decline since 2001 as investors exit leveraged bets and slowing economic growth erodes demand for raw materials.

The value of the 19 commodities in the Reuters-Jefferies CRB Index fell $280.6 billion, or 43 percent, from its July 3 peak, a loss larger than their total worth two years ago, data compiled by Bloomberg show. UBS AG, the Zurich-based bank that bought Enron Corp.’s energy unit in 2002, plans to exit most commodity trading. About 15 percent of investors in Boone Pickens’s BP Capital LLC hedge fund may want their money back.

The same credit-market seizure that led to last month’s bankruptcy of New York-based Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch & Co. is squeezing speculators who drove commodities to record highs. Slower expansion in the U.S., China and India is also undermining prices of crude oil, which fell 36 percent, and corn, down 43 percent.

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CNBC – Japanese government bond futures tumbled nearly a full point on Thursday, with traders citing selling by foreign funds in a move that was exaggerated by thin conditions.

September futures plunged as much as 1.14 points to 137.11 as market players suspect that hedge funds sold a large amount of futures abruptly, with other market players spooked by the move and dumping positions as well.

Traders and analysts cited a variety of reasons — including selling tied to the lead contract’s roll-over next week and flows in the interest rate swaps market — but said there was not a single trigger. "A sudden selling of futures without any big cash bond market action showed the move was highly related to hedge funds who trade purely on technical reasons," said Satoshi Yamada, a senior strategist at Nikko Citigroup.

Other market players said the sharp drop showed just how fragile financial markets are right now as damaged banks have pulled back. "Why today? Why now? Why JGBs? Who knows," said Joseph Kraft, head of Japan capital markets at Dresdner Kleinwort. "Banks are scaling back and volumes are very thin. When you see sizable selling, everyone gets out of the way." The lead futures contract fell 0.85 point to 137.50, pulling further away from a four-month high of 138.80 hit last week.

Among other reasons noted for the selling, traders said that some bond dealers may have sold futures to hedge their books before the pricing of five-year bonds issued by two utilities. Others said that commodity trading advisers, or CTAs, may have finally sold futures because of their relative steepness compared with the cash market — a trend that had stirred worries in the market that it could lead to a sell-off.

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