big positions get smaller
market vibes
July 7…)
In the news
#MarineTraffic data recorded 108 verified vessel transits through the Strait of Hormuz between 3 and 5 July, with 43 crossings on 3 July, 34 on 4 July and 31 on 5 July. Traffic was broadly balanced by direction, with 60 East-to-West crossings and 48 West-to-East crossings. The war is over.
Iran has a massive amount of floating oil it can’t sell (50+ mm barrels). Buyers want reliability and the IRGC has a reputation for being unreliable because they continue to shoot missiles at VLCCs exiting the SOH. Plus KSA is aggressively discounting to capture Iranian customers in Asia. According to Platts, Russian Urals is under pre-war prices at $52/barrel. Lots of oil for sale.
Three year treasury auctions today… followed by 10s on Wednesday and 30s on Thursday.
in the markets
There is a lot of FUD across the board this morning, especially in markets where short positioning is excessive like long-dated Treasuries, the dollar, JGBs and Yen. Equities really don’t have a narrative other than previous good earnings but the risk premium is negative and alpha has been more rotation than trend at these highs.
SOFR COTs are record short. TFF treasury COTs (proxy for managed money) gross short positions in 2s through 30s are near-record highs. Short interest in TLT and LQD ETFs is 20% of float or higher. Fwiw, Truflation Daily US CPI is 1.78% YoY today.
It is possible the FOMC is so wrong-headed on rates they will wreck the economy and we’ll have a financial crisis when the voters go to the polls. Extreme margin debt and leverage etc… But they can’t be that dumb… or can they? It’s a tough call. Bonds are heavy for many reasons not the least of which is short selling.
More on that in the vibe.
