May 29. Sugar and oil
–Revision to Q1 GDP will be released this morning, expected -0.8 to -1.0. The latest Atlanta Fed GDP Now estimate for Q2 is +0.8. Looks like we’re running just about flat.
–Japan unemployment is just 3.3%, a new pre-crisis low. Ten year JGB is 38 bps. How does that fit with the text books?
–Trade in US rate futures remains quiet. Ten year yield fell from 213.7 to 213. The eurodollar curve steepened, with greens (3rd year; strongest part of the curve) +4.5 but golds (5th yr) up only 1 bp. Peak one-yr euro$ spread is still EDZ15/EDZ16 at just 80 bps, down 2.5 on the day.
–Crude oil started the day making new recent lows, but rebounded as inventories continue to be drawn down (maybe only to be stored on tankers?). In any case, crude is starting this morning up around 70 cents at 58.40. For those that think the oil market has yet to retest the lows, take heart from the overlaid chart of sugar and oil below. Sugar also had a tentative bounce in April…only to make new lows at the end of May. I’m sure the fundamentals of the two markets are quite different, but sugar is used for ethanol production. Brazil is the largest producer of sugar, likely not a good sign for the Bovespa.
Sugar and Crude Oil
