Making up excuses to buy palladium

Jan 16, 2020

–Not a lot to talk about in rate markets.  Ten year yield fell another 2.8 bps to 1.788%.  The curve eased to new lows for this new year, with 2/10 down just over 1 bp to 22.8 and red/gold euro$ pack spread at essentially the same level, 22.625, also a new recent low.  The China deal is signed, we now move to impeachment. Real yields, as depicted by the ten year inflation-indexed note, are hovering just above ZERO, with the ten year tip yield of 3 bps.  In Q4 2018 it was over 115 bps.  If there’s no real yield, might as well buy any asset that throws off some type of cash flow.  Right?

–And that leads me directly into the palladium market.  There IS some excitement there, as the March contract is up $70 this morning to a record high of $2240/oz.  It’s more than double its previous spike high of just over $1000 in the beginning of 2001 (recession ensued shortly thereafter).  Its recent low at the start of 2016 was around $500 and has been surging ever since; in July of last year it was around $900.  By now it’s probably no secret that Elon Musk has been stockpiling the metal for the expected surge in demand for Teslas (as reflected in the stock price) which of course, will require a LOT of catalytic conve….  Oh, wait a minute. Scratch that.  No. it’s actually for the redesign of the new Ford 150 pick-up, which will be part of the new middle-class tax package being unveiled by the administration (tax credits for pick-ups).  In any case, beware a turn.  Because the price of palladium tumbles with the onset of recession….

Posted on January 16, 2020 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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