Five charts of the financial week: Trump's oil grab, Broadcom blues and ROI-Bonds.
Every Friday, Open Interest distills the previous five days' financial activity into five charts that highlight the "major trends" and "surprises" as well as the "overlooked moves".
1. BONDS BOIL
The cooler air of September chilled the sovereign bond markets this week as summer came to an end. Traders are bracing themselves for rate increases around the globe this month.
The yield on Japan's benchmark 10 year bond surpassed 3% for the very first time since 1996. Germany's Bund yield also reached its highest point in the last 15 years.
The breakdown of these yields shows that the latest move was driven at least in part by "real" inflation-adjusted rates -- and not by inflation expectations or the murkier term premium. This could make the increases stickier.
2. Change of Hands
JAMIE McGEEVER, ROI Markets columnist: The marginal buyers in the $29 trillion Treasury Market have changed -- this could make "the world's largest, most liquid market" more volatile. In recent years, China and other central banks have reduced their Treasury exposure. Instead, "fast money", including hedge funds and speculators from the United States has taken their place. Hedge funds own $2.6 trillion in outstanding Treasuries, which is more than 8%.
The result is that conservative investors who are long-term and price-insensitive will be replaced by private investors who are yield-sensitive and nimble, with a shorter time frame, often using a lot of leverage.
As Treasuries, global sovereign bonds, and U.S. Treasurys are experiencing their biggest selloff in years, it's worth considering whether the ownership structure of the U.S. Bond Market increases the risk that an "accident", turns a correction, into a crisis.
3. The Art of the Oil Deal
RON BOUSSO is a?ROI Energy columnist. This week, President Donald Trump?unveiled a highly-unusual agreement that granted the U.S. a fifth of Venezuela’s oil reserves.
According to the proposal, the U.S. will acquire a 35% share in North American Blue Energy Partners. This company would then receive a lease for 100 years on 17 Venezuelan oilfields with estimated reserves of 65 billion barrels. The U.S. gains 20% of the production in exchange for a 100-year lease on 17 Venezuelan oilfields with estimated reserves of 65 billion barrels.
Venezuelans have criticized the deal, with some calling it a modern-day version of colonialism while others say it is reminiscent of election-year policies. The proposal is fraught with political, legal, and commercial dangers, including the risk of sabotaging the economic recovery that it aims to promote.
4. FUEL FIXATION
GAVIN MAGUIRE is a columnist for ROI Global Energy Transformation. The renewed tensions in the Middle East have brought crude oil prices to the attention of investors as a gauge of economic stress. Brent has risen 'above $95 / barrel. The price of gasoline is the most immediate concern for U.S. consumers.
Fuel prices will likely be under pressure to rise in the 10 weeks before the midterm elections in the United States. Fuel prices are likely to rise as the midterm elections in the United States, which are less than 10 weeks away, approach.
5. BROADCOM AT THE BACKFOOT
ANNA SZYMANSKI is the Editor-in Charge of ROI. Broadcom, the largest company to release earnings this week, has seen its share price plummet since Wednesday's announcement. The U.S. Chipmaker exceeded revenue expectations in the?third quarter, and raised its revenue forecast for 2027 AI chips. However, it's?fourth-quarter guidance was below analyst estimates. Before the most recent decline, the company had been significantly behind its peers and the SOX chip index. The bar to impress investors in the AI age keeps on rising.
(source: Reuters)
