Category: zerohedge

Not great, not terrible: that’s the best way to describe the just concluded 30Y auction.

With bonds turmoiling in the past 10 minutes following the latest round of shockingly hawkish comments from the Fed’s Bullard, some suggested that it may not be the worst idea to push back today’s $23 billion 30-year Treasury auction to tomorrow…

Maybe push the 30Y auction to tomorrow…. just a thought

— zerohedge (@zerohedge) February 10, 2022

… amid fears that the burst in bond market chaos could lead to a repeat of last February’s 7Y auction disaster.

Well, with the auction pricing moments ago, the good news is that we didn’t have a failed auction. The bad news is that the auction was nowhere near as stellar as the blockbuster 3Y and 10Y auctions earlier this week (both of which are now deep underwater).

So what happened: the Treasury sold $23BN in 30Y notes at a 2.340% high yield, sharply higher than last month’s 2.075%, the highest since May 2021 and a tail of 1.1bps above the When Issued.

The bid to cover of 2.302 was actually not that bad, and came right on top of the six-auction average of 2.305 (and below last month’s 2.354).

The internals were also actually not too bad: Indirects took down 68.0%, above last month’s 65.0% and well above the 64.3% recent average. And with Directs taking down 17.8%, Dealers were left holding just 14.3%, the lowest since October.

In response, yields initially spiked higher, although on a day like today when everything has exploded, it didn’t really make much of a dent since the 10Y was already trading well north of 2.00% and the 30Y above 2.30%. In fact, despite the ugly auction, yields eventually dipped after pushing to session wides, as the market scrambles to triangulate what is the correct price now that everything is in flux, the economy is overheating and a recession appears inevitable, the only question is when.

St.Louis Fed president Jim Bullard has gone full hawktard after the Biden White House appears to have greenlit The Fed to crash the economy:

• *FED’S BULLARD FAVORS 100 BPS INTEREST-RATE INCREASES BY JULY 1

• *BULLARD FAVORS FIRST HALF-POINT U.S. RATE INCREASE SINCE 2000

Finally, this seemed to trigger the push…

• *BULLARD: SHOULD BE OPEN TO CONSIDERING INTER-MEETING INCREASE

That sent the odds of a 50bps March rate-hike up to 80%…

Stocks immediately lurched lower…

The 2Y yield is exploding higher after Bullard’s comments…

And finally, Bullard also noted that he favors starting QT (balance sheet reduction) in Q2 and added that this action may require asset-sales.

It appears they really are willing to crash the economy.

Authored by Zachary Stieber via The Epoch Times,

The U.S. Department of Homeland Security (DHS) has confirmed it’s tracking potential truck convoys in the United States after Canadian protests against COVID-19 vaccine mandates unfolded in multiple cities.

DHS “is tracking reports of a potential convoy that may be planning to travel to several U.S. cities,” an agency spokesperson told The Epoch Times in an email.

“We have not observed specific calls for violence within the United States associated with this convoy, and are working closely with our federal, state, and local partners to continuously assess the threat environment and keep our communities safe,” the spokesperson added.

“DHS will continue to share timely and actionable information with the public. Over the past year, DHS has increased timely and actionable intelligence and information sharing and strengthened operational coordination with partners across every level of government and the private sector.”

Secretary of Homeland Security Alejandro Mayorkas testifies before a Senate panel in the Dirksen Senate Office Building in Washington on Sept. 21, 2021. (Jim Lo Scalzo/Pool/Getty Images)

DHS is involved in helping secure the upcoming Super Bowl LVI, set to take place in Inglewood, California on Feb. 13.

“There are online discussions that suggest holding an event at a specific location near the Super Bowl on game day,” DHS said in a notice sent to federal, state and local partners and obtained by ABC News.

“While there are currently no indications of planned violence or civil unrest, if hundreds of trucks converge in a major metropolitan city, the convoy could potentially severely disrupt transportation, federal government and law enforcement operations, and emergency services through gridlock and potential counterprotests,” the DHS said.

The agency has also worked with various partners to boost security in the Washington region following the Jan. 6, 2021, breach of the U.S. Capitol.

Truckers in Canada recently descended upon multiple cities, including Ottawa, in protest against vaccine mandates. Starting Jan. 15, truck drivers entering Canada were required to be vaccinated. Foreigners were told they’d be rejected entry while Canadians who don’t show proof of vaccination must quarantine.

Protesters talk to police as a vehicle convoy blocks the Ambassador Bridge in Windsor, Ont., on Feb. 9, 2022. (Lisa Lin/The Epoch Times)

Some Americans have floated plans to organize similar convoys to Washington and elsewhere in protest against mandates, including one that requires truck drivers and other people trying to cross one of America’s land borders to be fully vaccinated.

Organizers of a group called The People’s Convoy announced Wednesday plans to gather in Indio, California on March 4 and rally that weekend “to defeat the unconstitutional mandates.”

Trucks part of the “Freedom Convoy” ride through downtown Ottawa, Canada, on Jan. 29, 2022. (Noé Chartier/The Epoch Times)

The trucker convoy will “roll out” of the state following the rally, organizers added, promising more details soon.

“Our brothers and sisters of the highway succeeded in opening Canadians’ eyes about the unconstitutional mandates and hardships forced onto their people,” organizers told more than 52,000 people on Facebook.

“Now it’s time for the citizens of the United States of America to unite and demand restoration of our constitutional rights.”

Other social media posts indicate the convoy will travel to Washington.

The convoys in Canada have disrupted some shipments to or from the United States, the White House said Feb. 7. The busiest U.S.-Canada border crossing was blocked by protesters starting the same day. Some U.S. automakers have paused output due to the protests.

This week, Peloton Interactive hit the ‘big reset button’ by firing 2,800 employees as it struggles with growth in a post-pandemic world. CNBC reports some fired employees managed to disrupt a virtual meeting as it welcomed its new CEO, Barry McCarthy. 

The virtual meeting, attended by Peloton co-founder and former CEO John Foley and McCarthy, was cut short when current and former employees unleashed a barrage of angry comments about job cuts in the chat function. Many voiced concerns that Peloton’s top execs mismanaged company operations. CNBC obtained some of those comments: 

“I’m selling all my Peloton apparel to pay my bills!!!,” wrote one person.

“This is awfully tone deaf,” said another.

“The company messed up by allowing people who were fired into this chat,” another user wrote.

“Too late to mod [moderate] this.”

To be sure, there were also a flurry of comments from workers welcoming McCarthy to the company and cheering him on in his new role.

“Let’s go Barry!” one person said.

Another wrote, “Hi Barry! Welcome to Peloton!”

McCarthy ended the meeting early as current and former employees revolted. The company faces numerous restructuring challenges for future growth in a post-pandemic world where gyms and businesses are reopening. 

Days earlier (on Tuesday), McCarthy allegedly released an email to staff (obtained by Twitter account “Internal Tech Emails“) explaining to staff who wasn’t fired, “today’s restructuring” is needed because “the math simply didn’t work and the status quo was unsustainable,” referring to prior operations during the pandemic when demand for bikes and treadmills were high. 

I know today’s restructuring news has been difficult. There’s no sugar-coating it. It’s a bitter pill and, in my experience, the sting has a long half-life. But the hard truth is either revenue had to grow faster, or spending had to shrink. The math simply didn’t work otherwise, and the status quo was unsustainable. One of my core management principles is about getting real. We have to be willing to confront the world as it is, not as we want it to be if we’re going to be successful. We have to be honest with ourselves and with each other in order to make that happen, even when the truth is uncomfortable or inconvenient to deal with – McCarthy email to employees 

Peloton’s market capitalization was once valued at nearly $50 billion in January 2021. One year later, it’s worth around 12.8 billion, a 75% reduction in value as earnings crumbled and the company embarks on a reset. 

It’s not immediately known if McCarthy is preparing the company for a sale or will use his knowledge of content-driven subscription models to keep Peloton afloat. 

By Tsvetana Paraskova of OilPrice.com,

The Permian has led U.S. shale production growth in recent months and will continue to do so in the coming months, but the oil price rally so far in 2022 has also driven increased drilling activity in other shale basins with higher breakeven prices.  

$90 oil is incentivizing more drilling activity in the Bakken in North Dakota, the Eagle Ford in Texas, Colorado’s DJ Basin, and in Wyoming, as the drilling economics at these high oil prices—the highest since 2014—are too attractive to pass up.  

In fact, the economics are the best since the start of the shale revolution, some oilfield service firms say, as oil prices are high while many producers are disciplined in spending. 

“Drilling economics today are better than they’ve ever been since the shale revolution started,” Chris Wright, chief executive officer at Liberty Oilfield Services, told Reuters. 

Like the biggest oilfield service providers, Schlumberger and Halliburton, Liberty Oilfield Services also sees “an upcycle driven by rapidly tightening markets for oil & gas” in the U.S. industry, Liberty said in its 2021 earnings release on Tuesday.

“E&P operators are responding to oil and gas price signals. The public operators are maintaining discipline and will show only modest production growth this year, while the private operators are reacting more robustly to strong commodity prices,” Liberty Oilfield Services said in its outlook for this year.     

Public supermajors ExxonMobil and Chevron plan a 25-percent and 10-percent increase in their Permian production this year, respectively. Many other public and private operators will also boost their oil and gas production in the Permian, where output hit a record high in recent weeks and is set to continue to grow. 

The other, costlier basins are also seeing increased activity, albeit at a smaller scale than in the Permian. The basins in North Dakota, Wyoming, and Colorado that were slower to recover from the COVID-inflicted downturn are already seeing increased activity and production. 

“It is encouraging that both the state’s industry and economy appear to be recovering from the pandemic- and market-induced downturn of 2020 sooner than anticipated. The number of rigs operating in the state continues to increase, with a reported 18 rigs as of December 2021,” the Wyoming State Geological Survey (WSGS) said in a January report on Wyoming’s oil and natural gas resources. 

“In fact, in the October 2021 report by the Wyoming Consensus Revenue Estimating Group, the oil production estimate for 2021 improved by 31 percent compared to predictions made a year ago,” wrote Erin Campbell, state geologist and WSGS director. 

“Recent forward-thinking projects have improved the outlook for Wyoming’s oil and gas industry into 2022 and beyond,” Campbell said in a statement carried by Wyoming-based news outlet County 17. 

“We have seen a rebound in oil production in the state that’s not to where it was pre-pandemic but definitely on that course again,” Rob Godby, an energy expert at the University of Wyoming, told Wyoming Public Radio at the end of January. 

Oil production in Wyoming, North Dakota, and Colorado may not return to the pre-pandemic peaks, but it is definitely on the rise as high oil prices make drilling and project economics great again. 

Supply chain challenges and higher labor and equipment costs could be stumbling blocks for U.S. shale, especially for the basins with higher breakeven prices. 

Still, U.S. crude oil production is set to hit a new record of 12.4 million barrels per day (bpd) in 2023, the Energy Information Administration (EIA) said in the January Short-Term Energy Outlook (STEO). 

On Tuesday the EIA raised its production forecast, expecting U.S. crude oil production to rise to an average of 12.0 million bpd in 2022 and 12.6 million bpd in 2023—an annual record high and 200,000 bpd above last month’s estimate. The previous annual average record of 12.3 million bpd was set in 2019.

For the past month Britain has been at the forefront of Western allies taking muscular action aimed at Russia over the Ukraine standoff, being the first country to initiate large military weapons shipments into the country, and recently issuing explosive allegations that Moscow is plotting a coup in Ukraine to install a pro-Kremlin puppet. 

Given all of this, it should come as no surprise that a high-level meeting between UK Foreign Secretary and Liz Truss and Russia’s Foreign Minister Sergey Lavrov ended in anger and finger-pointing, a much different tone compared to the amicable atmosphere of the Putin-Macron meeting days ago. It further underscores the emergent de facto divide among NATO allies – the Germany-France side is seeking robust diplomacy and de-escalation, while the US-UK and some Baltic states appear bent on muscle-flexing and confrontation. In recent days, NATO leaders have taken pains to stress the Western alliance is “unified” and unshaken in the face of Russian “aggression”. 

Looks like Liz Truss’ Moscow trip has not gone down well with Lavrov, who said UK diplomats came “unprepared” to their meeting and said it was “like a mute talking to a deaf person” pic.twitter.com/GkTIxYRBI4

— max seddon (@maxseddon) February 10, 2022

The Thursday meeting in Moscow appears to have been disastrously confrontational, with the Russian side charging the UK with grandstanding and stubborn refusal to listen to any legitimate concerns…

“I’m honestly disappointed that what we have is a conversation between a dumb and a deaf person…Our most detailed explanations fell on unprepared soil,” Lavrov told a joint news conference with Britain’s Liz Truss.

“They say Russia is waiting until the ground freezes like a stone so its tanks can easily cross into Ukrainian territory. I think the ground was like that today with our British colleagues, from which numerous facts that we produced bounced off,” he continued in usually accusatory language. 

Truss in response used the occasion to again charge Russia with preparing to invade its sovereign neighbor: 

“I can’t see any other reason for having 100,000 troops stationed on the border, apart from to threaten Ukraine. And if Russia is serious about diplomacy, they need to remove those troops and desist from the threats,” she said.

“No one is undermining Russia’s security – that is simply not true,” Truss added. On the question of seeking NATO membership, she said it remains “perfectly proper” for Ukraine to seek allies to help defend itself.

In a marked departure from Macron’s more conciliatory words while in Moscow this week (good cop, bad cop perhaps?), she said, “If there were to be a Russian incursion into Ukraine, the Ukrainians will fight.” She warned: “This would be a prolonged and drawn-out conflict. The UK and our allies would put in place severe sanctions targeting individuals and institutions. The United States has been clear that Nord Stream 2 [the pipeline project] would not go ahead.” Though the question remains just how the US could go about shutting down a pipeline which is complete, and already a de facto reality.

Authored by Paul Joseph Watson via Summit News,

Scientists in Hungary examining a unique variant of COVID-19 have discovered genetic material that suggests the strain was being examined in a Chinese lab, bolstering the lab leak theory.

The researchers “found traces of a unique variant of coronavirus while examining DNA from soil from Antarctica that had been sent to the firm Sangon Biotech in Shanghai,” reports the Daily Mail.

Genetic material from Chinese hamsters and green monkeys was also discovered, “which may suggest the virus was being examined in a lab, using either the animals themselves or their cells,” according to the report.

Viscount Ridley said that such evidence bolsters the theory that the virus accidentally escaped or was leaked from the Wuhan lab deliberately.

The presence of “three key [COVID] mutations” is characteristic of the early sequences of the virus, according to Ridley.

The discovery contradicts claims that the virus jumped from animals to humans naturally.

For the best part of a year, the lab leak theory was dismissed by the legacy media and ‘fact checkers’ as a racist conspiracy theory.

It subsequently emerged that Dr. Peter Daszak, President of the EcoHealth Alliance, a group that has extensive ties to the Wuhan lab gain of function research, thanked Dr. Anthony Fauci for dismissing the lab leak theory early on in the pandemic.

He subsequently created a pressure campaign via a letter published by The Lancet to force the scientific community into avoiding looking into the lab as a potential source of the outbreak.

Daszak was also tasked by Facebook with ‘fact-checking’ (censoring) information related to the hypothesis, while Google, which via YouTube also censored information about the theory, also funded Daszak’s virus research.

Daszak was also the lead investigator for the World Health Organization investigation that determined within 3 hours of visiting the Wuhan lab in February 2021 that there was no leak purely based on the word of researchers there.

As we highlighted last year, one of the World Health Organization’s leading infectious diseases experts said that the first COVID ‘patient zero’ was “likely” a lab worker at the Wuhan Institute of Virology.

*  *  *

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Today’s CPI print was a stunner: despite JPM hearing “whispers” that inflation would miss expectations, not only did that not happen with CPI now coming in higher than Wall Street estimates 9 of the past 11 months, but CPI came in at the hottest level since 1982 when the Fed Funds rate was 11.50%.

And with the market’s head still spinning from today’s post CPI moves, let’s take a look at what exactly the BLS reported:

Headline CPI and core CPI popped 0.6% (0.65%/0.58% unrounded) mom in January, kicking off the new year with a positive inflation surprise. This boosted the yoy rates to 7.5% from 7.04% for headline and 6.0% from 5.5% for core — both the highest since 1982 as noted above.

Within headline, food prices accelerated to a 0.9% clip from 0.5% in December, while energy prices also came in at 0.9%, keeping steady from the previous month.

There was broad-based strength across goods and services.

First on goods, household furnishings & supplies surged 1.6% mom, apparel spiked 1.1% mom, used cars jumped 1.5% mom, recreation commodities climbed 1.0% mom, medical goods rose 0.9% mom, other goods increased 0.8% mom, alcohol was up 0.4% mom, and education/comm. increased 0.3%. The only soft component was new cars, which was flat. The widespread pressure across goods likely reflects ongoing supply chain constraints which have not yet shown signs of material improvement.

In services, rents stayed hot, with OER up 0.42% mom and rent of primary residence accelerating to a 0.54% clip—the strongest monthly increase since October 1992. Tight labor markets and strengthening wage growth are likely underpinning the rent trajectory, which could continue to heat up in coming months. Medical care services accelerated to a 0.6% mom clip, doubling from December. Hospital services spiked 0.5% mom as the surge in Omicron cases may have boosted payments, health insurance spiked 2.7% mom, and professional services grew 0.2% as physicians seemed to be unaffected by the 0.75% Medicare cut this month. Omicron seemed to have a mixed impact on travel prices. On one hand, lodging plunged 3.9% mom and car/truck rental slid 7% mom. On the other hand, airline fares jumped 2.3% mom. Broader transportation services rose 1.0% as motor vehicle insurance also gained 0.9% mom. Recreation (+0.8%), other personal (+0.7%), and water/sewer/trash (+0.9%) all gained impressively as well. Education/comm services edged up 0.1% mom while household operations was unreported for a second consecutive month.

A visual summary of the data looks like this, first on a M/M basis..

… and then the YoY CPI print.

Incidentally for those wondering what the Fed’s change in the CPI basket as part of its biennial update looks like, here is the answer:

According to Bank of America, “for the Fed this report provides another wake-up call. Inflation is here and it continues to make its presence known everywhere.” It’s why the bank remains comfortable with its hawkish call for the Fed to hike seven times this year, beginning at the next FOMC meeting in March.

The surprisingly strong report drove the nominal Treasury curve flatter, with the front-end up 10bps. The market now assigns around 50% odds of a 50bps rate hike in March, a 20PPT increase in market-implied probability on the print. Inflation breakevens rose sharply in shorter dated tenors (2y +12bps), while longer-tenor breakevens were little changed. Real rates led the more modest move higher in 5y-30y tenors. Needless to say, today’s print endorses the Fed to move more quickly, and the market will likely encourage the Fed to hike 50bps at the next meeting.

However, more importantly, the market is now also starting to price in the rate cuts that will follow the current hiking cycle which will end in a recession, as they always do. It’s why after tumbling after the CPI print, risk assets have stormed higher and are now trading near session highs on expectations of the QE/ZIRP that will follow the coming recession.

Well that all turned around quickly.

The dollar is in freefall after spiking ion the hot CPI…

Stocks are soaring (S&P, Dow back into the green)

Gold is ripping higher…

Crypto is rebounding to the highs of the day..

But bonds remain at their high yields of the day…

How long will this last? The European close, maybe?

As his approval rating plunged below 40 for the first time – and is now significantly below that of President Trump at this time in his term – President Biden knew he had to come out and address the fact that despite all his promises, the average American is facing prices on consumer goods rising at their fastest in 40 years.

In a statement from The White House, the president blames the pandemic, says he has lots of tools, empathizes with ‘real stress at the kitchen table’, and then tells a giant fib about wages…

My two top economic priorities have been to create a growing economy with more good-paying jobs, and to lower the prices Americans have faced from the global problem of inflation related to the pandemic. We have seen historic success on the first priority, with the greatest year of job growth in history, Americans finding better jobs, better wages, and better benefits, along with the fastest economic growth in decades. On higher prices, we have been using every tool at our disposal, and while today is a reminder that Americans’ budgets are being stretched in ways that create real stress at the kitchen table, there are also signs that we will make it through this challenge.

While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022. And fortunately we saw positive real wage growth last month, and moderation in auto prices, which have made up about a quarter of headline inflation over the last year. We separately saw good news with new unemployment claims continuing to decline. That’s a sign of the real progress we’ve made in getting Americans back to work over the last year.

My administration will continue to be all hands on deck to win this fight. We will continue to rebuild our infrastructure and manufacturing, so we can make more in America and strengthen our supply chains here at home. We will continue to fight for costs in areas that have held back families and working people for decades, from prescription drugs to child care and elder care to their energy costs. And we will continue to promote more competition to make our markets more competitive and give consumers more choices.

The problem is – that is a lie!

Auto prices did anything but moderate…

And Real wages are down for 10 straight months on a year-over-year basis…

… but we thought ‘disinformation’ was terrorism now?

Perhaps that is why Biden’s current approval rating is below that of Trump’s current approval rating also?