July 12. Commodity Carnage
–It’s been a tough month for most commodities besides oil, which did its best to catch up yesterday with Aug WTI down 3.73 yesterday to 70.38. Grains made new lows. Dec Corn was 4.25 in early June, closed at a new low yesterday near 3.53. Beans have plunged from 10.60 to 8.48 over the same time frame. Copper and other industrial metals also hit new lows yesterday. Copper is down 17% from last month’s level, from 3.31 to 2.75. Gold and silver had seen small bounces in the first few sessions of July, but went back down to the lows yesterday. Emerging markets were again under pressure, but it really all seems to be tracking China, where the yuan was set higher this morning and SHCOMP rallied.
–Yields fell yesterday in spite of the ten year auction. Ten year yield fell 2.9 bps to 2.842%. On the euro$ curve, greens were the leaders, rising 4.25 bps, while reds were up only 3.0. Reds to all deferred contracts made new lows. Red/green -1.25 to NEGATIVE 1.25 bps. Red/blue -1.125 to -3.125, and red/gold -0.875 to -0.875. Ominously, the inversion is seeping further up the curve. Yesterday was the first time I saw EDZ19/EDZ20 close underwater, at -1.0. In treasuries, 2/10 posted a new low of 26.8. This in spite of robust PPI data yesterday (yoy Core +2.8. Today brings CPI, expected 2.9 headline and 2.3 Core on a yoy basis, which would both be 0.1 higher than last month.
–The market is pricing high odds of a hike in September, but after that it’s becoming murkier by the day. 30 year auction this afternoon.
