Comment of the Day
2nd August 2023
Eoin Treacy
Aug 3
Video commentary for August 3rd 2023
A link today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: US debt downgrade and positive employment weighs on bonds, stocks and boosts the dollar. Brazil surprises with a 0.50% rate cut and guidance for further moves,Japan, China, Europe all pullback in a broad risk off day.
US Ramps Up Debt Issuance, Adding Fuel to Selloff in Treasuries
This article from Bloomberg may be of interest. Here is a section:
The bump in issuance showcases the rising borrowing needs that contributed to Tuesday’s decision by Fitch Ratings to lower the sovereign US credit rating by one level, to AA+. Fitch said it expects US finances to deteriorate over the next three years. That’s from an already enlarged position — the Treasury is pencilling in some $1 trillion worth of issuance in all this quarter.
Ahead of the announcement, dealers had also laid out expectations for stepped-up issuance of other securities, and for the boosts in sales to stretch into 2024, which the Treasury confirmed on Wednesday.
“While these changes will make substantial progress towards aligning auction sizes with intermediate- to long-term borrowing needs, further gradual increases will likely be necessary in future quarters” the department said in a statement.
Eoin Treacy’s view
The original downgrade in 2011 was a non-event for the bond market because demand was ample. This time around the Treasury is increasing borrowing and expects to issue more than the market expected. The fact this event was followed by stronger employment numbers suggests scope for higher rates. Bonds are a market like any other and more supply against a low demand environment is negative for prices.
This section continues in the Subscriber’s Area.
Thailand Mulls Suspending Rice Farming on Drought
This article from the Bangkok post may be of interest. Here is a section:
Thai government considers suspension of rice farming in central region to save water amid drought, Bangkok Post reports, citing Surasri Kidtimonton, secretary-general of the Office of the National Water Resources.
Rainfall this year has been lower than average triggering an expectation of drier rainy season
Hardest areas will likely to be the central provinces, which is considered the country’s main rice growing region
Region may face 40% drop in accumulated precipitation this rainy season, likely causing widespread water shortages
Water levels are also at low level at four main dams including Bhumibol in Tak province and Sirikit in Uttaradit province
Eoin Treacy’s view
Pressure on rice harvests across India, Pakistan and now Thailand have the potential to be a potent source of inflation in the region over the next several months. That’s not good news for regional central banks that were hoping to be able to ease policy.
This section continues in the Subscriber’s Area.
Baseball-Size Hail Makes Insuring Solar and Wind Farms Pricier
This article from Bloomberg may be of interest. Here is a section:
Solar plants and wind farms are crucial weapons in the battle against greenhouse gas emissions. So it’s a cruel irony that their effectiveness is often hobbled by damage from storms, floods, wildfires and other disasters amplified by global warming. That’s making them harder to insure. Property insurance premiums for US solar facilities have soared as much as 50% over the past year, threatening to slow their rollout and derail global efforts to cut carbon emissions.
Eoin Treacy’s view
Contradiction is a central theme in crowd psychology. It is the most obvious sign a mania is in play. The logic of hedging the risk of climate change with the climate dependent energy sources does not make sense to me. The fact that the media consensus calls for a greater weighting of solar and wind energy without making allowances for the risk that weather is variable and likely to become more so is evidence of a mania.
This section continues in the Subscriber’s Area.
Eoin’s personal portfolio: two investment positions opened August 1st 2023
Eoin Treacy’s view
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
This section continues in the Subscriber’s Area.
© 2023 Eoin Treacy
548 Market Street PMB 72296, San Francisco, CA 94104
