Weekend Update! US 10Y Breakeven Inflation Rate Hits Record High As WTI Oil And Lithium Surge (Toronto Home Goes From $613k Over Asking Price)

Unfortunately, the US Breakeven 10Y inflation rate hit another all-time high as West Texas Intermediate Crude Oil (Cushing Spot) soars.

But note that the WTI Crude spot rate is still lower than it previous peak in June 2008. What is notable in the above chart is that M2 Money growth YoY has slowed after Covid “Stimulypto”. But M2 is still growing at an 11% YoY clip, much faster growth than pre-Covid rates. So, Federal stimulypto is still in place, helping to drive inflation to the moon.

Example of how crazy this is getting? A house in Toronto Canada (our cousins to the north) just went to $613,000 OVER ASKING PRICE! While some may dismiss this as “Well, that is Canada” it does show how inflation is ravaging home affordability in North America.

As The Biden Administration and Congress pushes Green Energy and demonizes fossil fuels, we are seeing Green Energy commodities such as Lithium (for batteries) soar even faster than oil prices.

Gold may be set to party like its 1999!

And just an update on The US Dollar, Crypto Currencies and Gold. This is just a sample of alternatives to the US Dollar for transactions. Freedom of choice is a great thing!

What a wonderful time to be a politician! As Winston Churchill once uttered, “Never let a crisis go to waste.” To quote Dwight Schrute from The Office, “It is part of the green initiative. And by green, I mean money.”

Trouble In Potomac City! US Treasury 10Y-5Y Curve Goes Further Into Inversion As Mortgage Rates Keeps Rising

We’ve got Trouble in Potomac City!

The US Treasury 10Y-5Y curve is going deeper into inversion.

The short end of the Treasury curve is rising, as expected, but declining at the 5 year tenor and beyond.

The aggregate Treasury Index is plunging as Fed Funds Futures signal 8.341 rate hikes over the next year.

Mortgage rates? Climbing as mortgage refinancing applications fall (as expected).

Is The Federal Reserve actually run by The Office’s Michael Scott?

Fed Expected To Raise Rate 8+ Times Over Next 12 Months Leading To Surge In 2-year Treasury Yield And Mortgage Rates (Powell’s Money Gun To Slow Rate Of Fire)

This is the chart from hell as The Fed is expected to take interest rates higher.

At least mortgage rates are down slightly today.

With 8+ rate hikes forecast over the next twelve months. Meaning that Powell’s Fed money gun is going to slow.

Do I Detect A Trend? US Treasury 10Y-5Y Slope Hits Zero (Inversion Imminent) As USD OIS Curve Steepens (Nickel UP 66.25%)

Today’s hawky-dove announcement by The Fed (raises rates by only 25 basis points, but hints that many rate hikes are around the corner.

The US Treasury 10Y-5Y curve has slumped to zero as inflation climbs and the number of rate hikes hits 7. Do I detect a trend?

And then there is the USD Overnight Indexed Swap (OIS) curve. Steep much?

And electric battery metal, nickel, is surging … again. Up 66.25%.

When they made Narcos, Pablo Escobar should have said “Nickel or Lead” instead of “Silver or Lead.”

Weekend Update II: Russian Bonds, Stocks, Ruble And Oil Exports Crash (But Russian 5Y CDS Drops To 554)

Russia is still engaged in its invasion of Ukraine. And the US continues to import crude oil from Russia. In fact, US crude oil imports from Russia soared under Biden only to decline again in December 2021.

On the sovereign bond and currency front, the 5.25% coupon Russian international sovereign bond has crashed to 22.494. And the Ruble/USD cross has crashed as well.

Sberbank Bank 5 1/8% corporate bond has crashed to 25.

The Russian blue-chip stock market (OTOB Russian Traded Index CRTX) has crashed by over 50% since the invasion of Ukraine.

Fortunately, I like Cheerios for breakfast made from oats, since wheat futures are soaring.

Russia’s Credit Default Swap (CDS) 5Y has dropped to a still-elevated 554.

The US really needs to ban Russian crude oil imports, since Biden’s failed in game theory by cutting US energy exploration on Federal lands and offshore drilling.

War is hell, as Vlad “The Ukrainian Impaler” Putin has demonstrated.

Inversion: Russia’s Sovereign Yield Curve Inverts As Technical Default Occurs (Russia’s Foreign Bond Sinks To 21.75) Biden Releases 1 1/2 Days Of Strategic Oil Reserves To Lower Prices

The US still has a steeply upward-sloping yield curve, but Russia has the exact opposite: a steeply downward-sloping or inverted yield curve.

Here is a comparison of the US Treasury Actives curve (steeply-upward sloping) compared to Russia’s sovereign curve (steeply-downward sloping).

Russia’s technical default on international bonds has led to its 5.25% coupon international bond (denominated in Euros) to plunge from 131.6 in September 2022 to only 21.75 this morning.

Commodity prices? Commodity prices saw the biggest one-day gain in 13 years on Tuesday.

Between Biden’s anti-fossil fuel executive orders and the Russian invasion of Ukraine, gasoline futures are up 126% since the start of January 2021.

Biden is tapping the US strategic oil reserves releasing 30 million barrels. Unfortunately, this amounts to only 1 1/2 days of US oil consumption. Instead of “Release the Kraken!”, Biden is releasing a Petit Basset Griffon Vendéen. Woof.

This reminds me of “Does your dog bite?”

Not, Not, Not! Mortgage Purchase Applications Declined 9% YoY For Week Ending February 25, 2022 (Refi Applications Drop 56% YoY)

While Corelogic’s January home price index was hot, hot, hot (UP 19.1% YoY), today’s mortgage applications index for the week ending February 25, 2022 was not, not, not.

Mortgage applications decreased 0.71 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 25, 2022.

The seasonally adjusted Purchase Index decreased 1.76 percent from one week earlier. The unadjusted Purchase Index increased 1.16 percent compared with the previous week and was 9 percent lower than the same week one year ago.

The Refinance Index increased 1 percent from the previous week and was 56 percent lower than the same week one year ago.

Yes, the mortgage industry is going through some difficult times. But not as difficult as trying to understand Biden’s State of the Union address: “Putin may circle Kyiv with tanks, but he’ll never gain the hearts and souls of the Iranian people.” Huh?

And then Biden’s closing remark was “Go get ’em!” What? Go get whom? The Russians? Inflation? Trump supporters?? I feel like Biden thought the SOTU was the annual Army-Navy football game.

US 30-year Mortgage Rate Rises To 4.30% As 10-year Treasury Yield Plunges -8.2 BPS (Eurozone Yields Dropping Like A Rock)

As someone who needs to move to Ohio, I would really appreciate it if mortgage rates would more closely follow the 10-year Treasury yield. But alas, Bankrate’s 30-year mortgage rate just rose to 4.30% as the US Treasury 10-year yield dropped -8.2 basis points.

Europe. Middle East and Africa (EMEA) sovereign yields are all down over 10 basis points averaging around -15 bps.

Ukraine’s 10-year yield has plummeted by -48.3 bps this morning.

The anticipated meeting between Russia and Ukraine on Belarus soil was a failure. Likely due to Belarus showing-off their modern air force capabilities.

US Trade Balance Widens To All-time High, Rise In Imports, Drop In Exports (10Y Treasury Yield Sags To 1.884%, Russian Ruble Getting Clobbered)

The U.S. merchandise-trade deficit unexpectedly widened in January to an all-time high, reflecting a record value of imports and a drop in shipments overseas.

The shortfall grew to $107.6 billion last month from $100.5 billion in December, according to Commerce Department data released Monday.

Meanwhile, the US Treasury 10Y yield fell to 1.884%.

The cost for shipping from the US to China has surged.

Meanwhile, the Russian Ruble is getting clobbered.

At least Putin hasn’t put himself on Russian currency … yet. Or nyet.

Russian Stock Market Drops Over 30% As Their 10-year Yield Rises To 15.23%, Ruble Crashes And UK Natural Gas Rises 51% (As Biden Throws The Booklet At Russia)

We now know that Russia has invaded Ukraine and President Biden really threw the booklet at Putin in a speech today. Rather than removing Russia from the SWIFT banking system which would have really hurt Russia’s trade with Europe, he gave a surprisingly cogent speech about the US and NATO agreeing to do … not much. He did warn us that energy prices would rise (which he helped do when he took office) and told energy companies not to gauge consumers.

The reaction in Russia? Their stock market tanked over 30% (not because of Biden’s speech, but because of negative costs of war).

Russia’s 10-year sovereign yield rose to 15.23%.

The Russian Ruble crashed and burned.

UK natural gas prices rose 51% today.

And while 17 Euro nations have negative 2 year sovereign yields, Russia has 2-year sovereign yield of 28.65% which is nothing compared to Ukraine’s 75% 2-year yield (in US Dollars).

The SWIFT system, or Society for Worldwide Interbank Financial Telecommunication, facilitates financial transactions and money transfers for banks located around the world. The system is overseen by the National Bank of Belgium and enables transactions between more than 11,000 financial institutions in more than 200 countries around the world. Removing Russia from the SWIFT system would really hurt Russian trade with Europe. I assume that Europe is scared of soaring energy costs, so probably doesn’t want Russia removed from SWIFT.

Queue Creedence Clearwater singing “Lookin’ Out My … Limo Window.”