Corn and gold
December 15, 2020
–Quiet session Monday which featured an underlying bid for FI. Tens ended unch’d at 89.1. Vol edged lower. In eurodollars, EDM1 9975 puts were bought for 1 in size of 25k, settled there vs 9983.5. The new 9981.25 put settled 2.5, which is below breakeven given current libor settings around 22 bps. There’s widespread agreement that inflation data will likely see a nice jump at the start of Q2 due to base effects, but no concern that the Fed’s response will consist of anything more than a shrug.
–On July 29 of this year I put out the following tweet, noting that Corn priced in terms of Gold had made a historic low. I had forgotten about it, but a friend (thanks TRS) mentioned that it was extemely close to the low of this year.
Below are updated charts over a 20 year and 1 year horizon. Interestingly, this bottom corresponds with the ten-year yield historic (end-of-day) yield of 50.8 on August 4. The rally so far hasn’t violated the downward sloping trend, but there has been a lot more interest recently in the gold/copper ratio and in industrial metals/commodities. By the way, yesterday was the first time the ten-yr Inflation-indexed note settled below -1.0% since early September. Unsurprisingly, gold has rebounded this morning.
