EU CONSUMER CYCLICALS: Consumer/Transport: commodity prices to start 2025
Jan-06 16:50
- Airlines: Jet fuel exits the year around lows and is still holding as a structural tailwind for this year; $730mt vs. ~$850 in 1H24 (-14%).
- Barry Callebaut: Cocoa prices are continuing to hold around concerning levels (futures in London above £9000/t, +150%yoy and +350% over early '23 levels). Unfortunately farmers in the two largest exporting countries - the Ivory Coast and Ghana - do not necessarily benefit. The governments in both regulate the price paid to farmers and sell forward their supply often. Net it has given rise to a deficit on contracted deliveries and not necessarily expected price incentive for farmers to boost production. The current cause of shortage are unfavourable weather and disease. Margins for Barry have thus far held and volumes ended the year flat but the company is warning for headwinds on demand ahead.
- JDE Peets; Coffee futures holding around highs, Arabica +70%yoy, Robusta +100%. Weather for the largest producers - Brazil and Vietnam - the driver but with added uncertainty from the EU's deforestation regulation coming into effect. Guidance given for the 2H was firm but lacked detail on spot assumptions outside expectation for "continued inflation and volatility".
- Pandora: Guidance was given based on $33/ounce for silver vs. spot at $30. Reminder rise in 2024 (circa +35%yoy) will impact margins this year (lagged 9-12months on hedging) and accounted for in this years guidance. Guided to margin impact are not concerning numbers for us - particularly given the strength in sales. {XAG Curncy}
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Dec-06 21:53
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
Dec-06 21:51
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Dec-06 21:05
Our latest Employment Insight has just been published and emailed to subscribers.
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