Category: Natural Gas

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.”

Breakeven 10Y Rate Above 3%, Highest In History!

The U.S. breakeven 10 year (USGGBE10 Index) went above 3% for the first time EVER.

Breakeven inflation is the difference between the nominal yield on a fixed-rate investment and the real yield (fixed spread) on an inflation-linked investment of similar maturity and credit quality.

But look at 30-year mortgage rates!

Way to go, Joe!

Headaches On Headaches! 10Y Treasury Rates Rises 8.6 BPS, But REAL 10Y Is -5.50% Thanks To 40-Year High Inflation

Headaches on headaches.

Overnight, the US Treasury yield rose to 2.38% as the number of forecast Fed rate hikes rose to 8.211. So, enjoy “low” rates while you can.

If we back out the highest inflation rate in 40 years, the REAL 10Y Treasury yield is -5.50%.

And the REAL 30Y mortgage rate is -3.57%.

Of course, the meteoric rise in inflation is due largely to Biden’s attack on the fossil fuel industry (until Russia’s invasion of Ukraine distracted from Biden’s inflation fiasco). Remember, Russia didn’t invade Ukraine until February 2022.

But rather than relax Biden’s anti-fossil fuel executive orders, Congress is now considering the “Gasoline Rebate Act” to give people gasoline stimulus checks to offset the alarming rise in gasoline prices. California governor Gavin “Nancy Pelosi’s nephew” Newsome is proposing a similar measure to give auto owners a $400 rebate to cover rising gasoline prices. Of course, Newsome is up for reelection and there are the midterm elections approaching, so I rule out true concern for citizens as a motive.

Wait. I thought the purpose of Biden’s executive orders was to reduce dependence on fossil fuels by driving up gasoline and natural gas prices producing a shift to “green energy.” Won’t these “gas rebates” simply continue the consumption of gasoline and natural gas? And increase inflation??

As Winston Churchill once said, “Never let a crisis go to waste.”

Simply Unaffordable! Soaring US Home Prices + Soaring Mortgage Rates + DECLINING Real Wages Makes US Housing Unaffordable For Millions (MBA Refi Applications Drop 14.37% From Preceding Week)

US housing is getting simply unaffordable.

US mortgage rates are soaring, US home prices are soaring, The Fed’s balance sheet is still growing, and US average hourly earnings are growing at a fraction of home price growth.

The unafforable nature of US housing prices is similar to that of 2005-2007 when home price growth greatly exceeded wage growth.

Another side effect of soaring mortgage rates: MBA refinancing applications plunged 14.37% from the preceding week.

Let’s see if The Fed actually tries to extinguish the affordability fire.

Trouble With The (Yield) Curve! 10Y-2Y Slope Approaching Inversion As Fed Plans Rate Hikes And Bitcoin Falls

The US Treasury yield curve (10Y-2Y) is rapidly approaching inversion at 20.5 bps (where the 10-year yield is lower than the 2-year yield). But the 10Y-3M curve is generally steepening at 173.33 bps.

Of course, the driving force behind the flattening of the 10Y-2Y curve is the rapidly rising 2-year Treasury yield (orange line). The last time the 10Y-2Y curve inverted was in 2019, prior to the COVID outbreak in early 2020.

The Wu Xia United States Federal Reserve Funds Shadow Rate has finally climbed back into positive territory.

At last look, The Federal Reserve is forecast to raise their target rate 7 times over the coming year. And with the increasing forecast of rate hikes, we are seeing the cryptocurrency Bitcoin fall from near $70,000 to $41,817.

President Biden announced that he will be issuing an executive order to combat rising energy prices (the rising energy prices that he caused in the first place with … executive orders). Let’s see what happens next.

Hello t-r-o-u-b-l-e.

Weekend Update! Crude Oil Above $100, Diesel Fuel UP 155%, Coal UP 256% Under Biden, Mortgage Rates Now Above 4.5%

The news just keeps getting worse and worse. Russia is still assaulting Ukraine, WTI Crude prices are above $100 a barrel and climbing, the Cleveland Browns signed Deshaun Watson to replace Baker Mayfield at quarterback, etc.

But back to energy prices. Since Biden was sworn-in as President, WTI Crude Oil futures are up 125%, regular gasoline prices are up 89%, and diesel fuel prices are up 155%. Diesel is important since America uses diesel-powered trucks to transport goods to market.

Globally? The world inflation rate has grown from 2% in January 2021 to 6.82%. Global food prices are up 24%.

Yes, WTI Crude and Brent Crude are above $100 per barrel.

And coal prices are up 256% under Shoeless Brainless Joe.

Mortgage rates? Bankrate’s 30-year mortgage rate is now above 4.50%.

Let’s see if Dr. StrangeFedpolicy raises rates as aggressively as signaled.

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.”

Fed Week! 10Y Treasury Yield UP 11.1 BPS, Mortgage Rates UP To 4.33%, Oil Down 7.5% (Russian, Ukraine Sovereign Curves Collapsing)

Yes, it is the much anticipated Fed Week! The Fed Open Market Committee (FOMC) will announce it decision (probably the first rate hike under Biden of 25 basis points).

This morning, the 10-year Treasury yield rose by 11.1 basis points and the Bankrate 30Y mortgage rate rose to 4.33%.

Actually, sovereign yields are up around 10 basis points in the US, Canada, and across the pond.

Fed Funds Futures are pointing to 7 rate hikes over the next year with 1.114 rate hikes on Wednesday. That means The FOMC may raise rates MORE than the 25 basis points expected my many (including me).

The US Treasury actives curve remains steeply upward sloping while both the Russian and Ukraine sovereign curves are steeply inverted and crashing.

Russia has pushed the weighted average maturity of its dollar sovereign bonds out to almost 12 years.

The most hilarious headline of the day is a Bloomberg opinion piece: “Fighting Inflation May Require the Fed to Be Brutal: Clive Crook” How about the Biden Administration relaxing oil drilling and pipeline restraints? Otherwise, brutal translates into causing a recession. Great suggestion, Clive! … NOT!

US Gasoline Prices UP 48% YoY In February, But Gas Prices Were UP 62% In April 2021 BEFORE Russia Invaded Ukraine

Well, so much for rising gasoline prices being the fault of Vlad “The Ukrainian Impaler” Putin and Russia invading Ukraine. In fact, gasoline prices were rising at a 62% YoY pace in April 2021, well before Russia’s invasion of Ukraine.

REAL gasoline prices (nominal gasoline prices less inflation) are up 32.72% YoY in February.

Press secretary Jen Psaki can take the opportunity to proclaim that REAL gasoline prices have actually declined in February.

Hi diddly dee, a President’s press secretary’s life for me!

I keep waiting for the Biden Administration and Congress to launch price controls and supply rationing rather than simply allow the Keystone Pipeline to be built and allow drilling on Federal lands.