Risk is on, guys.
Yields are up too with the 30 year trading at 1.99% having breached 2% in early trade - the inflation story must be true, mustn't it?
Not according to Westpac
They wrote today...
Oil is clearly reflecting demand from a growing, or “reflating” economy, however this is completely being reflected in inflationary expectations rather than real yield.
We find that curious and in our view it suggests that the market has very different view of the potential for inflation expectations to deteriorate than the Fed currently does. It also suggests that a further extended sell-off from current levels might be moving USTs into and oversold condition, at least for now.
Here's a chart they provided in their report.
This fits Macrodesiac's view on inflation too.
We reckon inflation is being driven predominantly by higher shipping costs, translating in more transient inflation pressures (i.e, the market is focused on the short and long term - the long term being the most unknowable - rather than the mid term).
Here's what Jack Jordan, Managing Editor of Ship & Bunker, had to say when asked for comment...
The spike in container freight rates since late 2020 has turned into a major headache for the end users of shipping.
Smaller businesses with less control over their supply chains will be the hardest hit, and some have been reporting more than tenfold increases in freight costs since the fourth quarter. The major retailers won't have suffered as much, but will still face a jump from last year's levels, on top of delays in some cases.
No immediate respite is expected, with the usually quiet Lunar New Year period in Asia anticipated to remain busy this year.
It's a pain in the arse. People are used to shipping being basically free, and now it's not.
Container lines played the market incredibly well last year.
Though now it's backfiring for them somewhat -- the current congestion around LA will be costing them a lot of money.
When asked whether we could presume the congestion in LA would lead to rates having to be lowered, Jack added...
Yes, the rates will come down soon, I'd expect. New capacity should come in to help balance the market.
So, looks like we could see some faltering over the next quarter or so in inflation expectations...
Musk buys Bitcoin
Elon Musk has gone balls deep into crypto, revealing that the company has bought $1.5bn worth of the cryptocurrency.
Bitcoin traded up 4% in a matter of minutes of the news, that the world's most unprofitable but largest car company was becoming the new Microstrategy.
It then hit all time highs 🚀
This comes as no surprise after the world's most likely potential supervillain had $DOGE in his Twitter bio last week, showing his leanings towards crypto as an asset.
Check out these two heavy hitters talk about the digital asset space tomorrow
Loyal to oil
Hedgefunds are feeling the bullishness for the black liquid.
Oil has been on a tear since it traded negative prices back in April, mainly due to the expectations that inflation would increase.
In the United States, hedge funds increased their allocation to Exxon Mobil Corp by 21,314 shares in the third quarter, the most recent U.S. filings compiled by Symmetric.io showed.
Hedge funds added another 9,070 shares of U.S. majors ConocoPhillips and 4,144 to Chevron Corp over the same time period.
This comes in the face of increasing environmental pressure on companies to be greener, creating big supply constraints.
With this, air travel is down, so there's much less oil being produced since demand just isn't there.
Over the last reporting week, speculators increased their net long by 7,900 lots to leave them with a net long of 346,053 lots as of last Tuesday, with the bulk of the buying over the reporting week being fresh longs rather than short covering.
If you don't know Utrust by now, then you'll never, ever, ever know them... oooooo
Cracking market open tune that one.
Grab a Hold card from them.
It's well worth it when you wanna spend yo' crypto.
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