May DDD 2025

[Sean K]

I counted more than a dozen in that post duc.

 

[ducati916]

Oil News:

Friday, May 16th, 2025

Donald Trump’s comments on a potential Iran nuclear deal have been the defining bearish moment of this week, however inertia from the market’s robust recovery last week, still riding high on the euphoria of not having debilitating tariffs on US imports to China, managed to lift ICE Brent around $65 per barrel towards the end of the week. With the Russia-Ukraine ceasefire negotiations dragging on, next week could see more of the same.

OPEC Pins Hopes on Lower non-OPEC Supply. OPEC kept its 2025 oil demand growth forecast of 1.3 million b/d unchanged in its May monthly report, all the while trimming the outlook of non-OPEC supply growth to 800,000 b/d against the background of lower oil prices, cutting mostly US shale production.

Saudi Aramco Unveils US Investment Bonanza. Saudi Aramco (TADAWUL:2222) announced 34 preliminary deals with US energy companies potentially worth $90 billion during President Trump’s visit to Saudi Arabia, including multi-billion MOAs with LNG developer NextDecade and utility firm Sempra.

Lower Demand Outlook Saps IEA’s Ambition. Amidst weakening US electric vehicle sales (just 10% in 2024), the International Energy Agency downgraded its impact assessment of oil demand replacement coming from EVs to 5.4 million b/d by 2030, down from 6 million b/d from last year’s forecast.

EU to Slap Tariffs on Ukraine. According to the Financial Times, the European Commission is preparing to raise tariffs on Ukraine, seeking to end the regime of duty-free imports formalized after the Russia-Ukraine war started, with Central European countries taking issue with Kyiv’s agricultural exports.

Mexico Eyes More Crude for Domestic Use. PMI, the trading arm of Mexico’s state oil company Pemex, has announced a decline in crude oil exports over the upcoming period as the long-delayed 340,000 b/d Dos Bocas refinery is finally able to receive crude and should take in some 100,000 b/d of Mexican oil.

Traders Bet on Russia-Ukraine Ending Soon. As negotiators from Russia and Ukraine met in Istanbul this week, global trading house Mercuria Energy has reportedlybuilt up a huge position in aluminium on the London Metal Exchange, expecting that sanctions relief vis-à-vis Moscow would tighten the market.

Eni Found an Investor for Its Renewables Behemoth. Italy’s oil major ENI (BIT:ENI) announced that it had entered exclusive talks with investment firm Ares Alternative Credit Management (NYSE:ARES) to sell a 20% stake in its renewables and retail unit Plenitude in a deal valued at more than $12 billion.

Congo Holds the Keys to Cobalt Prices. With benchmark LME three-month cobalt prices rising to $33,700 per metric tonne lately, the Democratic Republic of Congo could push even higher as it considers imposing stricter export restrictions after the current four-month export ban ends in June.

Western Majors Want to Keep Venezuelan Projects. US oil major Chevron (NYSE:CVX) and several European upstream companies participating in Venezuelan oil projects are currently in negotiations with the Trump administration to ensure they can keep their respective stakes in joint ventures with PDVSA.

US Court Finds CFTC Behaviour Inexcusable. A New Jersey court found that the lawsuit filed by the Commodity Futures Trading Commission (CFTC) against trading firm My Forex Funds was unlawful and in bad faith, falsely claiming that its tax payments to Canadian authorities amounted to fraud.

IEA Reiterates Its Oversupply Warnings. Doubling down on expectations of oversupply, the International Energy Agency (IEA) has lifted global supply growth this year to 1.6 million b/d, up almost 400,000 b/d from its previous forecast, arguing that expedited OPEC+ cuts will continue over 2025.

Canadian Oil Sands Roiled by Hostile Takeover Bid. Canada’s upstream firm Strathcona (TSE:SCR) is seeking to launch a $4.25 billion hostile takeover bid for peer oil sands producer MEG Energy (TSE:MEG), potentially making it the country’s fifth-largest producer, following a direct offer dismissal from MEG’s board.

Denmark Mulls Lifting 40-Year Nuclear Ban. The government of Denmark is considering lifting its ban on nuclear power imposed back in 1985, following the pro-nuclear Swedes, with Energy Minister Lars Aagaard claiming that the country cannot have a power grid ‘based on solar and wind alone’.

Elliott Forces US Major to Divest Assets. Under pressure from activist investor Elliott Investment Management, US refining giant Phillips 66 (NYSESX) agreed to sell a 65% stake in its German and Austrian retail fuel business to private equity firms EEP and Stonepeak for $2.8 billion.





Another week in the books.






A good week for the bulls.

jog on
duc

 

[ducati916]

This came after market close.

No-one should be surprised.

But actually having the headline is not a great thing. Markets will have the w/e to think about it.

jog on
duc

 

[divs4ever]

View attachment 199654


This came after market close.

No-one should be surprised.

But actually having the headline is not a great thing. Markets will have the w/e to think about it.

jog on
duc

i was surprised

i thought that final rating cut ( out of the 3 major agencies ) should have come several years back ( somewhere around 2018-2019 )

now 'a great thing ' ... maybe it is

some investment institutions might have to change their investment mandate OR abandon US Treasuries as low-risk investments/pristine capital

this might explain some recent unusual moves in the bond markets recently ( which maybe i mistook as geopolitical factors ) , because surely there was some info leakage from the credit-rating agencies .

will this been glossed over , or THE black swan to start the journey back to rational valuations

clear out your bomb shelters just in case ( you need them )

 

[Sean K]

View attachment 199654


This came after market close.

No-one should be surprised.

But actually having the headline is not a great thing. Markets will have the w/e to think about it.

jog on
duc

Good for gold?

 

[Captain_Chaza]

"Just a Storm in a Tea Cup"

 

[qldfrog]

Good for gold?

Was thinking that...

 

[divs4ever]

Good for gold?

for real gold ( in your physical possession ) yes

the major risks then are theft and official confiscation

 

[Sean K]

for real gold ( in your physical possession ) yes

the major risks then are theft and official confiscation

Might be an interesting open on Monday.





(Kitco News) - Gold prices caught a new safe-haven bid in the final minutes of the trading week after rating agency Moody’s downgraded the U.S. credit rating by one notch.

After the close on Friday, the agency lowered U.S. debt to Aa1 from Aaa, citing rising interest costs and unsustainable debt growth. At the same time, it revised its outlook on the U.S. to "stable" from "negative."

“This one-notch downgrade on our 21-notch rating scale reflects the increase, over more than a decade, in government debt and interest payment ratios to levels that are significantly higher than those of similarly rated sovereigns,” the agency said in a statement.

The downgrade comes as the U.S. government has implemented strict austerity measures through the Department of Government Efficiency, overseen by Tesla CEO Elon Musk. While Musk initially promised $2 trillion in cuts, the savings have been significantly lower. According to reports, less than $100 billion in verified savings has been achieved.

Looking ahead, Moody’s said it sees little hope that government spending will materially change.

“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s said. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”

Markets had little time to react to Moody’s downgrade before the weekend; however, gold saw a solid reversal, with prices ending the week back above $3,200 an ounce.

While gold rallied, U.S. Treasury yields ticked higher and stock index futures wavered in after-hours trading, reflecting investor uncertainty heading into the weekend.

Moody's was the last of the major ratings agencies to keep an Aaa rating for U.S. sovereign debt; however, it had lowered its outlook in late 2023 because of the government’s growing fiscal deficit and higher interest payments.

 

[ducati916]

So of course the market data was prior to the release by Moody's of the debt downgrade.

Technically, it would be very hard to be anything other than bullish going into next week other than stocks are a little extended and could well pull back. Because the general consensus is so bullish, I'd be a little cautious.

That being said, there is a lot of political skullduggery occurring behind the scenes which will be tomorrow's post.


jog on
duc

 

[ducati916]

So

JOINT STATEMENT by the People’s Republic of China and the Russian Federation on Global Strategic Stability_Ministry of Foreign Affairs of the People's Republic of China

Ignored by Google;



Which is all about a 'hey motherfu*ker' statement.

Which means, hey motherfu*ker, you ignore this and we will have a problem.

They then went on to confirm that they were not going to use the USD:




Full:https://www.reuters.com/world/putin...-partnership-between-russia-china-2025-05-08/

Which also means an increase in the use of gold as a neutral reserve asset.

Trump upping the stakes on his visit to the Saudi's:



Because of course oil is an issue, particularly where currently POO does not incentivise Shale to keep production high.


Bonds




Yields are up after the downgrade



30yr briefly back above that crucial 5%



$MOVE is meh.

Reducing or eliminating the SLR rule (will obviously happen) has damped down any fires that may have ignited in the bond market. I read somewhere that the Trump administration simply ignore and refuse to enforce any rules/regulations that they don't like. My guess is that the SLR is being ignored until it is formally disposed of.




I see stocks going to new ATH.

Why?

Because the scrapping of the SLR rule is a soft form of YCC, implied rather than explicit. Powell won't play ball, fine, we take his ball away and do what we need to do anyway. Possibly Powell is quite happy to do this as it maintains his reputation.

The result is higher inflation.

There is about $2 Trillion in wiggle room. Eventually and ever more quickly, that will be used up.

As a trade, I would expect financials to trade lower. If you are stuffing the primary dealers et al with worthless paper, not a great thing.




jog on
duc

 

[ducati916]

Just catching up:

Oil News:

Rome will host the fifth round of US-Iran talks this upcoming weekend, whilst the Trump administration is ratcheting up sanctions pressure on Iranian shipping companies and Chinese buyers of Iranian oil, having OFAC-listed two Chinese refiners last month.

- Iran’s leader, Ayatollah Ali Khamenei, questioned the viability of a deal with the United States, saying that Trump’s demand to halt nuclear enrichment is ‘excessive and outrageous’, lowering the likelihood of a diplomatic breakthrough.

- Chinese refiners are hoping for the negotiations to fail - accounting for 77% of all Iranian exports last year, the so-called teapots in Shandong province would no longer enjoy discounts on Iranian oil.

- According to OPEC secondary sources, Iran’s oil production remained steady at 3.3 million b/d in April, higher than the 2024 average of 3.25 million b/d, even if floating storage of Iranian storage anchored off Singapore and Malaysia has been on the rise, potentially signalling difficulties in delivering the oil to China.

Market Movers

- Nigeria is in negotiations with Brazil’s state oil company Petrobras (NYSEBR) to provide it with deepwater exploration acreage, five years after it divested all its Nigerian assets to trading firm Vitol.

- France’s nuclear giant Orano is reportedly looking into divesting its uranium mining assets in Niger after Paris’ relationship with West African countries have deteriorated beyond repair.

- The government of Oman extended an exploration and production deal with OccidentalPetroleum (NYSE:OXY) for Block 53 until 2050, with the US oil major vowing to invest at least $29 billion in the acreage.

- French energy major TotalEnergies (NYSE:TTE) signed a long-term supply deal for 2 mtpa of LNG from the planned Ksi Lisims site in British Columbia, Canada, also allowingit to take an ownership stake in the project.

Tuesday, May 20, 2025

Oil prices have been range-bound after weeks of wild swings, with both positioning data and traded volumes indicating traders are taking a breather to assess where Brent futures would be moving next. With Brent at $65 per barrel and WTI at $62.5 per barrel, the next big pricing move might come from the Russia-Ukraine or US-Iran negotiations.

Chinese Refinery Runs Fall on Trump Impact. China’s crude refinery throughput declined by 1.3% from a year ago and averaged 14.12 million b/d last month, with consultants estimating that utilisation rates were as low as 73.8%, the lowest in the country’s post-COVID recovery period.

UK Signs All-Round Trade Treaty with Europe. Nine years after the United Kingdom voted to leave the European Union, London signed a defence and trade treaty with Brussels, opening up each other’s waters for fishing for 12 years, easing agricultural exports and facilitating arms investments.

Baltic Sea Shipping Roiled by Tanker Detainments. Russia detained a Greek tanker after it left Estonia’s port of Sillamae and crossed into Russian territorial waters, four days after the Baltic country’s navy attempted to stop a Russia-bound oil tanker for being part of the ‘shadow fleet’.

Indonesia Investigates Its Own State Oil Firm. The Indonesian Attorney General’s Office reached out to a number of trading firms in Singapore to investigate corruption in its state oil and gas company Pertamina, alleging that fraudulent oil import deals caused $12 billion in lost government revenue.

Turkey Keeps on Finding More and More Gas. Turkish explorer TPAO has discovereda new offshore gas field containing at least 75 billion cubic metres (2.6 Tcf) in the Black Sea, adding to the 400 bcm Sakarya field as Ankara doubles down on domestic exploration, still importing 90% of its energy needs.

China Becomes the New Favourite of TMX Exporters. Fears of US-Canada trade frictions have led Canadian oil exporters to focus primarily on China with their TMX barrels, sending 226,000 b/d of heavy sour crude (or 55% of all exports) to Chinese refiners, with Sinopec emerging as the largest buyer.

Equatorial Guinea’s Territory Expands. Following five lengthy years of arbitration, the International Court of Justice ruled in favor of Equatorial Guinea in its territorial dispute with Gabon, awarding it the Mbanie, Cocotiers and Conga islands, located in the oil-rich waters in the Gulf of Guinea.

China’s Copper Stocks Recover. Copper inventories in warehouses controlled by the Shanghai Futures Exchange rebounded sharply this week after weeks of continuous declines driven by strong US-bound export flows, jumping 34% week-on-week to 108,142 metric tonnes, marking the end of destocking.

Denmark Seeks to Attract Wind Investment. Having failed to attract any bids for its biggest ever offshore wind tender in late 2024, Denmark plans to launch its 2025 offering with two areas in the Danish North Sea, willing to dole out government subsidies for new developments worth $8.3 billion.

Venezuela Takes Over Chevron’s Export Grades. As US sanctions were snapped back on Venezuela, the Latin American country’s state oil firm PDVSA has begun exporting the heavy Boscan grade itself, produced at the Petroboscan JV that US oil major Chevron (NYSE:CVX) used to operate.

Nippon Steel Still Didn’t Give Up on Its Dream. Japanese steel giant Nippon Steel (TYO:5401) vowed to invest up to $4 billion in a new US steel mill should the Trump administration approve its $14 billion takeover of US Steel (NYSE:X), ahead of the May 21 deadline for the completion of its national security review.

EU Pitches Lower Oil Price Cap on Russia. The European Commission will propose to lower the current $60 per barrel oil price cap to $50 per barrel in this week’s meeting of G7 finance ministers, as lower outright prices are now keeping Russian barrels sanctions-compliant even without using the ‘shadow fleet’.

Shell Plays Down BP Merger Probability. After re-electing Shell CEO (LON:SHEL) Wael Sawan, the annual general meeting of the London-based energy major poured cold water on market speculation about a potential BP merger, saying the bar for M&A deals is very high, preferring to put money into share buybacks.


BTC

• Bitcoin is flirting with all-time highs again for the first time since January. It officially broke out on Sunday, but today could mark the first close above $107k.
  
  
• It peaked ahead of stocks in January and bottomed along with the S&P 500 on April 8th. After correcting -28% on a closing basis, Bitcoin found support at former resistance, around $76k.
  
  
• Bitcoin is emerging from a four-month base, setting the stage for a new leg higher. The recent correction was healthy, as it shook out the weak hands and cleared out some of the post-election froth.
  

The Takeaway: After shaking out the weak hands, one of the strongest uptrends in the world has potentially resumed as Bitcoin emerges from a four-month corrective phase.







So, deregulation does roll off the tongue a whole lot easier than "Fed QE run through the banks", doesn't it? Because lowering the SLR is exactly that.

Add into that the new Bill re. Stablecoins (stablecoins are the 4'th or 5'th largest holder of UST paper) and you can see liquidity is being scraped up everywhere.

Foreign UST holdings rose $133B Mar v. Feb. UK, Caymans, & Canada were $86B of that $133B; China sold $19B. UK surpassed China as the 2nd biggest US foreign creditor for 1st time ever in March. Cayman Islands (pop. ~73,000) is now the 4th biggest US foreign creditor at $455B.

These (above) are Hedge Funds. LOL.

jog on
duc

 

[peter2]

So when is the equity market going to take notice of the bond market? It would be handy to know.

 

[divs4ever]

So when is the equity market going to take notice of the bond market? It would be handy to know.

easy , when the margin calls start going out ( a lot of those bonds are leveraged to the eyeballs )

so squeezed traders will have to sell to restore the collateral

but will it happen tomorrow , next week maybe next year ?

look for the big guys to start unwinding the leverage

 

[ducati916]

So when is the equity market going to take notice of the bond market? It would be handy to know.

So the Bond market is really about liquidity:




135 has been the magic number. However this is getting lower over time and quite quickly. I'm thinking 130 to 125 would be the current number. When liquidity contracts, the stock market falls hard.

The Treasury and Fed are supplying loads of liquidity via QE measures that are of course not referred to as QE.





Yields on the other hand are not a liquidity issue for the Bond market per se. They are however an issue for (i) the real economy and (ii) the stock market as corporate debt needs to be rolled over. Lots of it.

So yesterday as yields spiked above 5% again, stocks sold off hard.

As I posted yesterday:

Foreign UST holdings rose $133B Mar v. Feb. UK, Caymans, & Canada were $86B of that $133B; China sold $19B. UK surpassed China as the 2nd biggest US foreign creditor for 1st time ever in March. Cayman Islands (pop. ~73,000) is now the 4th biggest US foreign creditor at $455B.

These (above) are Hedge Funds. LOL.

Hedge Funds are carrying their inventory (position) at x20 to x100 leverage. They have no leeway. They will unload quickly in market stress, assuming that (i) there is enough liquidity for them to do so.

​

​

Pain at the Long End​

The infamous bond vigilantes are starting to inflict some real pain, and they’re not coming for just the US. The suffering for holders of the longest-dated bonds is global, and the market’s informal enforcers have brought enough rope to ensnare them all. It’s tempting to pile the sharp rise in 30-year yields uniquely on the US and its squabbling politicians, but other markets are seeing selloffs just as dramatic, often thanks to their own local factors. The US 30-year yield has just topped 5%, a round number that will always cause a frisson — but the UK, with the highest 30-year yield since 1997, and Japan, where it’s broken to an all-time high, saw bigger moves. All around the world, investors are more reluctant to lend to governments over long terms: The proximate trigger for the US bond market (described as “yippy” by President Donald Trump last month as rising yields prodded him into delaying tariffs) was a lackluster auction of 20-year debt. That had an instant effect: There were good candidates to explain the nerves. Moody’s downgrade, announced Friday, has little practical effect, but dampens sentiment. Confidence was also shaken by negotiations in Congress over what is now officially named The One Big Beautiful Bill Act. On its face, as Justin Fox explains, the bill is pretty ugly — cutting services for the poor and using the savings to cut taxes mostly for the wealthy, even as the deficit rises. Inequality doesn’t particularly bother bond investors, but the way legislators don’t seem even to be trying to cut the deficit is a big problem. Much remains up for negotiation, but the outcome will almost certainly be bond-negative. The question, according to TS Lombard’s Steven Blitz, is: “How much of a haircut are bondholders willing to accept, from dollar depreciation and/or inflation?” The proposed deficit rise for next year is $472 billion. Even if tariffs raise $250 billion in revenue to alleviate this, that would still leave a 13% increase compared to earlier estimates, Blitz says, before counting interest on the debt. Bond math means rising yields for the longest issues inflict particular pain on those holding them. To illustrate, this is the price of the Austria century bond, not due to pay out until 2120, over the last five years as its yield rose to 3% from 0.75%: Usually, rising yields help a currency, as they attract capital. That didn’t happen this time as the dollar fell and gave up much ground it had recently regained — a sign that the US is losing its status as a haven, even now that tariff anxiety is dissipating. Bloomberg’s dollar index, which compares it to developed and emerging market currencies, is back close to a three-year low that has been tested several times: One problem for the dollar is institutional. Once adopted, a US budget is hard to adapt, and the first fiscal package of any administration generally sets the template for four years. So if the US opts for fiscal policy that disappoints currency traders, they will have to live with it for a while. To quote George Saravelos, chief of FX strategy at Deutsche Bank AG: Whatever the Republican Congress decides to do with fiscal policy over the next few weeks, it will most likely be “locked in” for the remainder of the decade. The very difficult reconciliation process and the potential loss of a Republican majority in the mid-terms essentially leaves space for only one major fiscal event during the current Trump administration. Once this concludes, there will be very little that can be done to change the fiscal trajectory for the foreseeable future. He points out that European countries can pivot on fiscal policy (within days when Germany created space for more defense spending, or in the UK during Liz Truss’s premiership in 2022). On that subject, the UK’s 30-year gilt yield is now higher than it was during the Truss crisis. As the chart shows, her move to introduce unfunded tax cuts was disastrously timed, just as inflation was peaking at above 10%. Many blame the vigilantes or, as Truss herself does, the nameless “blob” of the British civil service for a disastrous premiership that was outlasted by a lettuce. But the greatest problem lay in the madness of trying to stimulate the economy when inflation was already through the roof: The resurgence in consumer price inflation in April, published Wednesday, came as a bona fide and very unpleasant surprise. Of the major economies, the UK looks to be the one with a realistic threat of stagflation, which means a dilemma for the Bank of England. According to Bloomberg’s World Interest Rate Probabilities, the market-implied Bank Rate for the end of this year has risen to 3.83% from 3.5% this month, as cuts look more problematic. The most dramatic move is in Japan, which not long ago was intervening to keep 10-year yields to zero. On Tuesday, Tokyo held its own disappointing auction of 20-year debt, while a hideous gaffe by Prime Minister Shigeru Ishiba, who told parliament that the fiscal situation was worse than Greece’s before the euro-zone crisis, further rattled confidence. The yield curve is now its steepest since 2012. Demand for a premium for the risk of lending over long periods to the government has returned: Finally, any analysis of rising yields would be incomplete without a reminder that they’re good news for someone — pension fund managers and their pensioners. Higher yields make it cheaper for defined benefit plans to fund the guarantees they have made to savers, and mitigate falling equity prices. As the consulting actuary Mercer shows in this chart, corporate pensions run by S&P 1500 companies are now fully funded, meaning that their assets are worth more than their liabilities. In 2019, they were starting at a deficit of more than 20%: It’s an ill wind. But for most of us, the upward drift in long yields is a problem that can no longer be ignored.

Smart money is buying across the board—grains, metals, equities, and even gold at the highs. COT Index readings are flashing 100s, signaling conviction, not caution. Gold miners pulled back—but remain YTD leaders, making this pause a potential buying opportunity. Want to know where the real flows are? Look at the COT Report. When commercials (the pros) are hitting 80–100 on the 3 year COT Index, that’s not noise—it’s conviction. (The index is based on the rate of change of smart money buyers to dumb money buyers.) Right now, we’ve got a cluster of green lighting up the board: Top Smart Money Buys (COT Index > 80):

​

Corn – 100% Wheat SRW – 100% KCBT Wheat – 100% Gold – 100% Nasdaq/S&P 500 E-Mini – 100% Russell 2000 – 100% Soybean Oil – 92% Coffee – 86% Palladium – 94% This is broad-based accumulation across grains, metals, energy, and even equities. The S&P 500 and Russell 2000 both sit at 100 on the COT index—the highest possible read. That’s not bearish positioning. That’s fuel for a rally. Smart money is stepping in across the board, and they’re doing it into weakness—not after confirmation. That’s how the producers of the products build size. It’s like the lookout on Ahab’s ship in Moby Dick. He doesn’t wait for the whale to surface in full view. He watches the smallest ripples in the water—tiny signs that something massive is rising beneath the surface. That’s what this is. The smart money sees the shift before the market does and they’re not waiting.

jog on
duc

 

[Joe90]

Are you able to provide the source for that COT report format please Duc?

 

[qldfrog]

So the Bond market is really about liquidity:


View attachment 199970

135 has been the magic number. However this is getting lower over time and quite quickly. I'm thinking 130 to 125 would be the current number. When liquidity contracts, the stock market falls hard.

The Treasury and Fed are supplying loads of liquidity via QE measures that are of course not referred to as QE.


View attachment 199969


Yields on the other hand are not a liquidity issue for the Bond market per se. They are however an issue for (i) the real economy and (ii) the stock market as corporate debt needs to be rolled over. Lots of it.

So yesterday as yields spiked above 5% again, stocks sold off hard.

As I posted yesterday:

Foreign UST holdings rose $133B Mar v. Feb. UK, Caymans, & Canada were $86B of that $133B; China sold $19B. UK surpassed China as the 2nd biggest US foreign creditor for 1st time ever in March. Cayman Islands (pop. ~73,000) is now the 4th biggest US foreign creditor at $455B.

These (above) are Hedge Funds. LOL.

Hedge Funds are carrying their inventory (position) at x20 to x100 leverage. They have no leeway. They will unload quickly in market stress, assuming that (i) there is enough liquidity for them to do so.

​

​ ​

​

Pain at the Long End​

The infamous bond vigilantes are starting to inflict some real pain, and they’re not coming for just the US. The suffering for holders of the longest-dated bonds is global, and the market’s informal enforcers have brought enough rope to ensnare them all. It’s tempting to pile the sharp rise in 30-year yields uniquely on the US and its squabbling politicians, but other markets are seeing selloffs just as dramatic, often thanks to their own local factors. The US 30-year yield has just topped 5%, a round number that will always cause a frisson — but the UK, with the highest 30-year yield since 1997, and Japan, where it’s broken to an all-time high, saw bigger moves. All around the world, investors are more reluctant to lend to governments over long terms: View attachment 199975 The proximate trigger for the US bond market (described as “yippy” by President Donald Trump last month as rising yields prodded him into delaying tariffs) was a lackluster auction of 20-year debt. That had an instant effect: View attachment 199976 There were good candidates to explain the nerves. Moody’s downgrade, announced Friday, has little practical effect, but dampens sentiment. Confidence was also shaken by negotiations in Congress over what is now officially named The One Big Beautiful Bill Act. On its face, as Justin Fox explains, the bill is pretty ugly — cutting services for the poor and using the savings to cut taxes mostly for the wealthy, even as the deficit rises. Inequality doesn’t particularly bother bond investors, but the way legislators don’t seem even to be trying to cut the deficit is a big problem. Much remains up for negotiation, but the outcome will almost certainly be bond-negative. The question, according to TS Lombard’s Steven Blitz, is: “How much of a haircut are bondholders willing to accept, from dollar depreciation and/or inflation?” The proposed deficit rise for next year is $472 billion. Even if tariffs raise $250 billion in revenue to alleviate this, that would still leave a 13% increase compared to earlier estimates, Blitz says, before counting interest on the debt. Bond math means rising yields for the longest issues inflict particular pain on those holding them. To illustrate, this is the price of the Austria century bond, not due to pay out until 2120, over the last five years as its yield rose to 3% from 0.75%: View attachment 199977 Usually, rising yields help a currency, as they attract capital. That didn’t happen this time as the dollar fell and gave up much ground it had recently regained — a sign that the US is losing its status as a haven, even now that tariff anxiety is dissipating. Bloomberg’s dollar index, which compares it to developed and emerging market currencies, is back close to a three-year low that has been tested several times: View attachment 199978 One problem for the dollar is institutional. Once adopted, a US budget is hard to adapt, and the first fiscal package of any administration generally sets the template for four years. So if the US opts for fiscal policy that disappoints currency traders, they will have to live with it for a while. To quote George Saravelos, chief of FX strategy at Deutsche Bank AG: He points out that European countries can pivot on fiscal policy (within days when Germany created space for more defense spending, or in the UK during Liz Truss’s premiership in 2022). On that subject, the UK’s 30-year gilt yield is now higher than it was during the Truss crisis. As the chart shows, her move to introduce unfunded tax cuts was disastrously timed, just as inflation was peaking at above 10%. Many blame the vigilantes or, as Truss herself does, the nameless “blob” of the British civil service for a disastrous premiership that was outlasted by a lettuce. But the greatest problem lay in the madness of trying to stimulate the economy when inflation was already through the roof: View attachment 199979 The resurgence in consumer price inflation in April, published Wednesday, came as a bona fide and very unpleasant surprise. Of the major economies, the UK looks to be the one with a realistic threat of stagflation, which means a dilemma for the Bank of England. According to Bloomberg’s World Interest Rate Probabilities, the market-implied Bank Rate for the end of this year has risen to 3.83% from 3.5% this month, as cuts look more problematic. The most dramatic move is in Japan, which not long ago was intervening to keep 10-year yields to zero. On Tuesday, Tokyo held its own disappointing auction of 20-year debt, while a hideous gaffe by Prime Minister Shigeru Ishiba, who told parliament that the fiscal situation was worse than Greece’s before the euro-zone crisis, further rattled confidence. The yield curve is now its steepest since 2012. Demand for a premium for the risk of lending over long periods to the government has returned: View attachment 199980 Finally, any analysis of rising yields would be incomplete without a reminder that they’re good news for someone — pension fund managers and their pensioners. Higher yields make it cheaper for defined benefit plans to fund the guarantees they have made to savers, and mitigate falling equity prices. As the consulting actuary Mercer shows in this chart, corporate pensions run by S&P 1500 companies are now fully funded, meaning that their assets are worth more than their liabilities. In 2019, they were starting at a deficit of more than 20%: View attachment 199981 It’s an ill wind. But for most of us, the upward drift in long yields is a problem that can no longer be ignored.

Smart money is buying across the board—grains, metals, equities, and even gold at the highs. COT Index readings are flashing 100s, signaling conviction, not caution. Gold miners pulled back—but remain YTD leaders, making this pause a potential buying opportunity. Want to know where the real flows are? Look at the COT Report. When commercials (the pros) are hitting 80–100 on the 3 year COT Index, that’s not noise—it’s conviction. (The index is based on the rate of change of smart money buyers to dumb money buyers.) Right now, we’ve got a cluster of green lighting up the board: View attachment 199982 Top Smart Money Buys (COT Index > 80):

View attachment 199983​

Corn – 100% Wheat SRW – 100% KCBT Wheat – 100% Gold – 100% Nasdaq/S&P 500 E-Mini – 100% Russell 2000 – 100% Soybean Oil – 92% Coffee – 86% Palladium – 94% This is broad-based accumulation across grains, metals, energy, and even equities. The S&P 500 and Russell 2000 both sit at 100 on the COT index—the highest possible read. That’s not bearish positioning. That’s fuel for a rally. Smart money is stepping in across the board, and they’re doing it into weakness—not after confirmation. That’s how the producers of the products build size. It’s like the lookout on Ahab’s ship in Moby Dick. He doesn’t wait for the whale to surface in full view. He watches the smallest ripples in the water—tiny signs that something massive is rising beneath the surface. That’s what this is. The smart money sees the shift before the market does and they’re not waiting.

View attachment 199974View attachment 199973View attachment 199972View attachment 199971

jog on
duc

5% for a 30y bond in USD sounds pretty good IF there is no default, and the USD does not collapses for us , US aliens

 

[TimeISmoney]

5% for a 30y bond in USD sounds pretty good IF there is no default, and the USD does not collapses for us , US aliens

And the other risk is if the USD collapses, you'll blow a lot of money.

Holding the position long would devour most of your money due to inflation.

 

[ducati916]

So this was pointed out to me by @qldfrog

I have always exhorted clients to keep a close eye on Japan. Major financial events often happen first in Japan, for example the late-1990s tech bubble bursting first in Japan.

So what should we make of the recent explosive rise in Japanese long bond yields (see chart below)?I endorse the comment from “End Game Macro” on X (formally Twitter) who wrote, “The cracks in global bond markets just turned into fractures. Japan’s 20-year government bond (JGB) auction was the worst since 1987. Bid-to-cover ratios collapsed. Yields on the 30-year spiked to 3.12%, and the 40-year hit an all-time record. This isn’t a one-off technical failure it’s the first sovereign domino tipping over in a structure that’s held the global system together for decades.”

The author continues, “Japan’s bond market isn’t isolated. It’s the keystone of global yield suppression. For years, Japanese institutions propped up the global bond market through the yen-funded carry trade and massive foreign bond purchases especially U.S.Treasuries. That era is ending in real time. The BOJ is losing control of the long end of its curve. And with FX-hedged returns on Treasuries now deeply negative, capital is being pulled home….This is the regime shift.

The sovereign bond repression model where rates are low, inflation is ignored, and balance sheets absorb unlimited debt is breaking. Japan’s failure is the signal. The U.S. response will define the consequences. The sequencing matters. Don’t get it backwards. Japan’s bond market may be the fuse, but the US is the [ticking fiscal] time-bomb.”

And therein lies the problem for global investors. Most commentators attribute the rise in US 30y yield to 5% to US domestic fiscal developments without putting it into a wider global context. Both the US treasury and equity markets are vulnerable, having been inflated by Japanese flows of funds (as has the dollar). And,if sharply higher JGB yields entice Japanese investors to return home, the unwinding of the carry trade could cause a loud sucking sound in US financial assets. Hence, I would rank trying to understandand follow the surging long end of the JGB market as then umber 1 most important thing for investors at the moment.


The US bond vigilantes are getting anxious and for good reason. Peter Berezinat the Bank Credit Analyst posted this great chart showing just how bad the US debt situation really is, especially if you use market interest rates. No wonder US30y yields are now above 5%.



This awful US fiscal situation (above) is the ticking time-bomb that End Game Macro alludes to. Bond vigilantes are rightly getting anxious and sharply rising 30y JGByields ain’t helping.



Let’s remind ourselves just how ‘off the scale’ the BoJ’s QE has been (left hand chart below). And the mounting signs that Japan has exited its deflationary quagmire (right hand chart) is putting more pressure on the BoJ to raise rates and shrink its bloated balance sheet.


Japanese core CPI inflation (or core, core as they like to call it) is now higher than it is in the US or eurozone. No wonder there is upward pressure on their bond yields


Bloomberg notes in an article that even the BoJ’s current moderate taper of QE has resulted in a hole in JGB demand. Given the size of the deficit, there is a lot to digest and so yields will rise.


And our own Stephen Spratt notes that buying of long-end JGBs was entirely driven by foreign buyers in recent months. I think EndGame Macro has it right–if like us you believe BoJ QE has been pivotal to US bubble equity valuations, then the ongoing JGB rout is a game changer.




Nuclear:

Trump’s New Nuclear Executive Order​ President Trump is expected to sign an executive order to reignite the U.S. nuclear industry. Energy Secretary Chris Wright called this America’s “new Manhattan Project.” With AI and data centers driving a surge in electricity demand, nuclear energy serves as more than just a clean energy solution - it’s strategic infrastructure. What’s in the Order?​ Faster Reactor Approvals The order slashes red tape for nuclear plant construction. Federal agencies will be directed to streamline permitting, fast-track environmental reviews, and identify federal sites ready for development. Securing the Uranium Supply Chain The U.S. still leans heavily on Russia and China for enriched uranium. Trump will invoke the Defense Production Act — labeling it a national emergency — to ramp up domestic uranium mining and processing. Federal Land for New Reactors Agencies will pinpoint government land where reactors can be built fast. This allows small modular reactors (SMRs) at military bases, national labs, or federal energy corridors. Billions in Federal Funding The Department of Energy will tap into its loan program, unlocking hundreds of billions of dollars to fund the next generation of nuclear plants. Shifting the NRC’s Role The Nuclear Regulatory Commission could also see pressure to move from gatekeeper to accelerator. Nuclear Names On The Rise​ New issue nuclear stocks - $OKLO, $SMR and $NNE are all up double-digits on the news. ​ ​ ​

Oil News:


May 23rd, 2025

What seemed to be a much-needed rangebound trading week with ICE Brent hovering around $64-65 per barrel without any distinct trend developing was changed by President Trump’s 50% tariff threat on Europe, triggering a new wave of macroeconomic concerns. Should US-EU tensions persist, next week’s OPEC+ meeting (and expected 411,000 b/d unwinding into July) could see Brent break below $60 per barrel again.

OPEC+ Mulls Another Huge Production Hike. Intent on weeding out high-cost producers from global markets and regain lost market share, OPEC+ is consideringanother 411,000 b/d production hike for July as its members meet on June 1, potentially unwinding 2.2 million b/d of voluntary cuts by October.

US Policy on Venezuela Turns Very Confusing. Whilst US special envoy Richard Grenell announced a 60-day extension of Chevron’s (NYSE:CVX) operating license in Venezuela, Secretary of State Marco Rubio refuted that claim and claimed the sanctions waiver will expire as scheduled on May 27.

P66 Becomes a Corporate Battleground. In one of the hottest boardroom fights of 2025, activist investor Elliott Investment Management won two seats on the executive board of US refining giant Phillips 66 (NYSESX), sending P66’s stock value down by 6% after the news broke out.

Wary of OPEC+ Market Flooding, Crude Storage Booms. US crude oil storage demand has risen to levels not seen since the early months of the COVID-19 pandemic, according to storage broker Tank Tiger, with market players expecting contango to hit soon as OPEC+ unwinds its 2.2 million b/d production cut.

BYD Pushes for Tesla’s European Share. Chinese EV carmaker BYD (SHE:002594) has reportedly sold more electric vehicles in Europe than Tesla for the first time on record, registering 7,231 units compared to the US company’s 7,165 units, a sea change given that BYD only started sales across the EU in 2023.

Russian Oil Firms Move into Rare Earths. Rosneft (MCX:ROSN), Russia’s largest oil producer, has acquired the country’s largest rare earth deposit Tomtor, believed to contain more than 11 million tonnes of open pit ore at 14.5% total rare earth oxides, signalling a diversification move into mining.

Nuclear Is About to Have Its Trump Moment. US nuclear stocks have rallied this week on the back of media speculating about US President Trump signing an executive order aimed at kickstarting the domestic nuclear energy industry, streamlining construction of new plants, and boosting uranium supply chains.

Iraq Revolts Against US-Kurdish Oil Deals. Iraq’s Oil Ministry denounced deals between smaller US oil companies and the semi-autonomous Kurdish Regional Government as unconstitutional, after upstream firms HKN Energy and WesternZagros pledged to invest a combined $110 billion in Kurdish oil fields.

Brazil Eyes Amazon Delta for Next Oil Boom. Having received approval this week for its environmental impact assessment in the Foz do Amazonas basin, Brazil’s state oil firm Petrobras (NYSEBR) is now readying a drillship to spud its first wildcat in the oil-prolific untapped area.

Rio Tinto Thrown into Disarray After CEO Departure. Rio Tinto (NYSE:RIO) fell 3% this week after the mining giant’s CEO, Jakob Stausholm, announced his departure from the company after taking over in early 2021, an unexpected move after he pivoted the company towards a more climate-neutral strategy.

US Resists European Pressure to Lower Oil Price Cap. The US Treasury doesn’t support the proposal of the European Union to revise the oil price cap on Russian crude from $60 per barrel to $50 per barrel, arguing that lower outright prices are already hurting the Russian budget enough.

Egypt Needs A Lot of Gas, Right Now. According to market reports, the government of Egypt is in negotiations to buy 40-60 cargoes of LNG (worth some $2-3 billion at current prices) amid a worsening electricity outlook as decreasing domestic gas production bodes ill for peak summer demand.

Pemex Embarks on Job-Cutting Spree. Mexico’s national oil company, Pemex, plansto cut 3,000 jobs after its Q1 2025 results saw a $2 billion quarterly loss and total debt soared past $101 billion, seeking to save $550 million in lower labour costs and streamline operations with just nine management areas.


From JC;

This content was brought to you by TrendLabs.com.​

The Becky Index Is Hot (My Friend's Index Is Hotter)​ by JC Parets, CMT​ ​ The "female economy" is big and getting bigger. Walmart (WMT) is a "hot mom" stock. Mrs. Parets is always right. Are you familiar with "The Becky Index"? It's a great thought experiment/concept. It's not a real exchange-traded fund (ETF). But there's a lot of data behind it. And it seems like a solid strategy, buying the stocks of companies where women spend a lot of money. So wait until you see what my friend Jeff Macke has come up with... The One Where Becky Meets Jeff​ "The S&P Becky 10 Index" was a made-up basket of stocks. It was based on a 2009 article in the Harvard Business Review about the "female economy." It included names like Chipotle Mexican Grill (CMG), Etsy (ETSY), Lululemon (LULU), Netflix (NFLX), Peloton (PTON) and Pinterest (PINS). There's also Adobe (ADBE), Apple (AAPL), and Facebook parent Meta Platforms (META). And, if the Becky Index ETF did exist, the returns would have been pretty impressive... But we have a better index that comes from my friend Jeff Macke. His is more of a "Hot Moms Index" and less about Becky. More specifically, this is where the hot moms hang out and/or spend their money. The 10-stock list currently includes... On Holding (ONON), Dave & Buster's (PLAY), Victoria's Secret (VSCO), The Gap (GAP), Urban Outfitters (URBN), Ralph Lauren (RL), Canada Goose (GOOS), Dutch Bros (BROS), Aritzia (ATZAF) and... Walmart (WMT). Yes, Walmart... According to Macke, the hot moms have moved on from Target (TGT) and are hanging at Walmart: Look at the difference in returns since 2022. WMT has doubled while TGT has been crushed. Get Up ONON It​ Of all the Macke names, the one I like most is the Swiss shoe company On Holding (ONON). And he loves it too. Speaking of "hot moms," I think my wife fits that description. (I definitely outkicked my coverage.) And she's on her third pair. You see, a few years ago, we were trading the stock. Some clients made fun of me because I didn't know anything about the shoe. They told me how great they were for tennis or just lounging. So, I took some of the profits we made and bought a pair of shoes, just to check them out. I didn't actually need a new pair of shoes. And, when the shoes arrived, my wife made a point to reiterate that I did not need another pair of sneakers. "It's just research, babe..." So, in that spirit, Mrs. Parets asks nicely if maybe she should do some "research" and get a pair for herself. "Sure, knock yourself out." And here we are, ONON pushing up against new all-time highs:: My wife has now fully retired from Nike (NKE) and is all On these days. First, The Becky Index got my attention. Then, my friend Jeff made a better version. I like Jeff's lot more. And we both think ONON is the best of the pack. So does my wife. And she's always right. Just ask her! ​

More later


jog on
duc

 

[ducati916]

• The largest stocks have led the recovery with the Magnificent 7 ETF ($MAGS) gaining +28% since the April 8th low versus +17% for the S&P 500 ($SPY).
  
  
• $MAGS is on track for its best month ever, although it was only launched a year ago. Its seven components— $MSFT, $NVDA, $AAPL, $AMZN, $META, $GOOGL, and $TSLA — represent over 30% of the S&P 500.
  
  
• Frank points out that $MAGS has formed a potential Bull Flag over the past seven days. This is a healthy way for price to digest its recent gains after such a sharp advance. A breakout would pave the way for a new leg higher. However, if this bull flag resolves lower, it will be a red flag!
  

The Takeaway: The Magnificent 7 ETF ($MAGS) has formed a potential Bull Flag over the past seven days as it digests its recent gains. $MAGS should resolve higher from this bullish consolidation pattern. However, if this bullish pattern fails, it will likely weigh on the broader market.


Fri, May 23, 2025

While down a bit today, this week has seen a spike in long-term Treasury yields. Given the surge in yields, there has been a shake-up in the relationship between Treasury yields and dividend yields for stocks. As shown below, currently only 7.9% of stocks in the S&P 500 have dividend yields above the 10-year Treasury yield (4.59% at the time of writing). Additionally, only 12.1% of stocks in the index have dividend yields above that of the 2-year Treasury (4.0%).



Of course, yield dynamics are different for different sectors. As shown below, Real Estate has the highest percentage of stocks with dividend yields above the yield on the 10-year and 2-year. Energy, Utilities, and Materials are the sectors with the next largest shares, whereas cyclical groups like Tech, Industrials, and Consumer Discretionary hardly have any members with dividend yields larger than Treasury yields.



At the moment, there are 40 S&P 500 stocks with higher dividend yields than the 10-year yield, and we list them below. Two Materials stocks top the list with 9%+ dividend yields and over 20% declines on the year.











Yields up over the week, stocks down. The magic number is 5%. We know the Bessent Put exists in the Bond market at around that 5% mark and 130 vol.

Markets are closed for Memorial Day on Monday. We also have NVDA earnings. The last couple have been unexciting as far as impacting the market, but you never know. These are the first earnings since tariffs hit the headlines.


jog on
duc