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10Y: Inflation Could Creep Back Up as Seaborne Trade InterruptedCBOT: Micro 10-Year Yield Futures ( CBOT_MINI:10Y1! ) Maritime transport is the backbone of international trade and the global economy. Over 80% of the global trade volume in goods is carried by sea, according to the UN. Therefore, whenever a major trade route is blocked, shipping time would be lengthened, which pushes up freight cost, and ultimately, the prices of merchandise. Suez Canal Blockage, March 2021 Traffic jams at sea are not rare. On March 23rd, 2021, a 400-metre-long container vessel, MV Ever Given, got diagonally stuck inside Egypt’s Suez Canal. Transport was completely blocked in the all-important 193-km narrow waterway for six days. Suez Canal is one of the world's busiest shipping channels for oil, refined fuels, grain, and other trades linking East to West. It moves about 12% of the global trade. Holding up traffic there could cost $9 billion per day, according to data from Lloyd’s list. Direct impact: The Baltic Dry Index (BDI), a benchmark for the cost of shipping goods worldwide, traded around 2350 before the blockage. It shot up to 3170 (+35%) by May and peaked at 5530 (+135%) by October. While canal blockage was not the only cause, it exposed weaknesses in global trade and triggered a chain reaction in price hikes. Influence: In February 2021, US CPI was well under control at a 1.7% annual rate. It jumped to 2.6% in March. By the time BDI peaked, CPI was at 6.2% in October. But it did not stop there, US CPI topped 9.1% in June 2022, 15 months after the blockage. Panama Canal Drought, August 2023 to Present The 65-kilometer-long Panama Canal connects the Atlantic and Pacific Oceans and is a key shipping hub for trade between North and South America to Asia and Europe. It links about 5% of global trade. In 2022, more than 14,000 ships passed through the canal. The Panama Canal is experiencing a severe drought now, resulting in a shortage of fresh water for the operation of the locks. This forced officials to slash the number of vessels they allow through and has created expensive headaches for shipping companies. Before the crisis, 38 ships a day moved through the canal. It’s now down to only 22. Canal authority now hosts special auctions to allow winner to cut in line and move his ship ahead in the queue. It is reported that shipping companies paid up to $2 million for this privilege, which is on top of the regular canal fees they paid. Direct impact: Unlike the Suez fiasco, drought would last for months. It’s estimated that daily passage could move up to 24 by January 2024. The canal would still be running at 65% capacity. This means that global trade could be slowed by as much as 2%. Red Sea Under Houthi Attacks, October 2023 to Present The Bab el-Mandeb Strait is between the Horn of Africa and the Middle East. It connects the Red Sea to the Gulf of Aden and the Arabian Sea. This waterway is used by container ships and exports of petroleum and natural gas from the Persian Gulf. Approximately 12% of the world’s trade, which includes 30% of all global containers, move through the Suez Canal. That then feeds through the Red Sea and Bab el-Mandeb. The Yemen-based Houthi militants have threatened to attack any vessels that have ownership ties to Israel or do business there. Overall, 13 vessels have been attacked at Red Sea since the Israel-Hamas conflict broke out in early October. On Saturday, MSC, the world’s largest shipping carrier, said that its ships will not transit the Suez Canal due to security risks. Shipping giants Hapag-Lloyd and Maersk also paused travel through the Red Sea a day earlier. Direct impact: The collective vessel market share of MSC, Hapag Lloyd, and Maersk is approximately 40% of global trade. The decrease in vessel transits by these three giant ocean carriers will be a financial hit to Egypt, which owns, operates, and maintains the Suez Canal. Egypt has already seen a hit in tourism due to the conflict. Impacts from Panama Canal and Red Sea Crisis The combined trade volume passing through Suez and Panama canals accounts for 17% of global trade. Any interruption, either man-made or by nature force, could reduce global goods supply and add to the price tag on store shelves. The long wait time at the canal and the extra weeks it takes for using alternative route both increase overall fuel consumption and other expenses. Even though crude oil price has been falling, freight shipping cost are now on the way up. This is like a tax on the economy. The impact on such a global scale could reverse the trend of cooling inflation. If recent history repeats itself, we could see US CPI creeping back up in the coming months, following a surge in the BDI. Trading Opportunity with CBOT Micro Yield Futures Last Wednesday, the Federal Reserve decided to keep the Fed Funds rate unchanged in the 5.25-5.50% range. While Fed officials put out inconsistent statements about what they would do next, investors overwhelmingly concluded that rate cuts are coming soon. On Thursday, both S&P and Nasdaq made 52-week high, of 4,738.57 and 14,855.62, respectively. The Dow reached a new all-time-high record of 37,347.60 on Friday. According to CME FedWatch Tool, the first rate-cut could occur in March, with a 69% probability. By the end of 2024, there is a 98% probability that the Fed Funds rate would be 4.25-4.50% or lower, indicating investor expectations of 4-7 cuts of 25 bps each. (Link: www.cmegroup.com) In the Treasury spot market, 10-Year yield was quoted 3.928% on Friday. This represents 132 bps below Fed Funds, and a 10Y-2Y spread at -51 bps. In the futures market, CBOT Micro Yield futures ($10Y) January 2024 contract (10YF4) was settled at 3.927 last Friday, in line with the spot market. If our analysis on pending inflation rebound is proven to be correct, the Fed would start cutting rates later than the market expected, and not as much as the Treasury market priced in at the moment. Each Micro 10Y Yield contract has a notional value of 1,000 index points, or $3,927 at current price. To acquire 1 contract, a trader is required to deposit an initial margin of $320. If the resurgence of inflation spurred by global supply chain disruption makes the Fed to maintain its hawkish stance and continue tighten the monetary policy, the rates will stay elevated. A trader with a long position will gain if 10Y yield rises. While a rate hike raises Treasury yield, the postponement of an expected rate cut also has similar effect. The forecasted low yield would now be revised up. As a result, the futures price, which is the 10Y yield, would go up, rendering a profit for the long position. On the other hand, if 10Y yield continues to fall, the trader would incur a loss of $250 for each 25bps cut. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
INDEX:BDILong
by JimHuangChicago
2
BDI crashing down and then SPX to follow, repeat 2020 but worseBollinger bands are a tell of a big move coming when they constrict. They are tightening historically the most ever, yes ever. Which means whatever has caused them to get this way is an artificial market force, a lie which has delayed this move, so they overtighten. Overlaying the SPX with BDI, we see the 2020 crisis demand shock take place, first the BDI, shipping orders vanished, and then the SPX followed shortly after that. The spring effect here will be worse than 2020, down. RSI shows weakening. The 200 MA also is now resistance. Sell in May and go away is about to release its forces. Bank closings, credit tightening, credit defaults, banks loans and leases less and this Monday's numbers could be staggering, market shock, all this doesn't help shipping. Shipping is the canary to the health of the economy. One lie upon another, then another false report (CPI), all a web of lies until it becomes the truth., and you cannot keep track of them. But there is coming a day when the lies will all come tumbling down, and the truth is PAIN such as this generation has never seen. Bails outs, bail ins, bail this, bail that, print more, create more debt, inflate more, the bag of tools the FED says they have are all just lies designed to cover up the next lie. Cardinal sins are that for a reason. They upset economics it took truthful years of supply and demand to build. The reset is coming, but it wont be the one the WEF wants, or AI (The Beast) , or anyone else. Digital currencies, blockchains, none will save us. The control "they " want will elude them, and the monster(s) they create will wind up controlling them and the species. IDIOTS! Why are some lessons never learned. The problem is this one will be a civilization pivot change that will rip the hearts of all. God will be the only one who can save us, save you. Count your profits now, and party now while you still can, but the fool says it will save them from the tribulations which are about to be unleashed. Isaiah: Otherwise, they might see with their eyes, hear with their hearts, and turn, and I would heal them.
INDEX:BDIShort
by claydoctor
Bitcoin and BDIWhat is the Baltic Dry Index (BDI) and what does bitcoin have to do with it? The index is a tool for measuring business activity in the world, and actually tracks the cost of shipping in the world by different classes of ships. Why does an investor or a mid-term trader need it? It can be used to forecast the demand for international maritime transportation, as well as business activity in the economy. You can see on the chart that the index actually predicted a covid collapse in 2020, and in 2008 the index also reflected the crisis in the economy with its fall, but with a slight lag. Today we can see that the index is in a local uptrend, on the breakdown of the downtrend, after the rebound from the bottom in February, based on the past behavior of the index, we can conclude that the uptrend should continue in order to continue the economic growth. What does bitcoin have to do with it? Bitcoin by its class belongs to the risky assets, I would even say to the super risky assets. Its movements in the market largely coincide with the U.S. stock market, especially to the small capitalization shares (small cap), this class of shares grows when investors do not see threats to their investments and there is a so-called risk on, risky investments are more sensitive to the economic situation. This year on the chart we see that bitcoin supports the local growth of the index, but also with a lag, as the growth of bitcoin began before the rebound in the index. Conclusion - the BDI index, will be useful to understand the economic situation in the market, and to understand the mood of investors to choose a strategy for investment or to enter the long / medium term position. Support for the author subscribe ✅ and start rocket 🚀. Good luck and profit to all.
INDEX:BDI
by Kirill_Gaitan
Baltic Dry IndexThe BDI or Baltic Dry Index - measures the cost of shipping goods worldwide. For 2022 - the BDI is down -34.14%. Ukraine was a large disruption for Grains - Barley, Corn, and Wheat. Factually had material impact. The index's value is generated by the demand for the raw materials and the supply of ships available to transport them. There is absolutely no shortage of Ships. Rather the Demand for Products is vastly reduced as Prices began to move far higher. 768,300 metric tons of Ukrainian grain were exported by Rail in early May. The trend towards overland has increased markedly. __________________________________________________________________ Overwhelming Price increases have dampened demand from Egypt to India as prices for Staples were extreme. Egypt is typically the world's largest wheat importer, buying more than 60% of its wheat from abroad, with Russia and Ukraine accounting for about 80% of government and private sector imports last year. 106M people live within Egypt's borders. 67 MIllion of them receive Bread Subsidies. Ripe for further disruptions to Supply and a repeat of the prior "Bread Riots" of 1977 when Sh_t went South in a very big hurry. Protests against the austerity measures in Cairo were far different then, Bread is symbolic. Contrast this with today's environment and we will see how the forced austerity becomes a hunger chant for the Ages. ____________________________________________________________________ Egypt is merely One of the Dozens of Countries that are facing Food Austerity. From Plentiful to barren, don' t believe it can't happen here, it can and will.
INDEX:BDI
by HK_L61
4
BDI - Baltic Dry IndexWassup moving goods arouund... Oops, not happening. China? Nope, re-opened for 61 Hours and closed up again. No more Honey for the Money. Increasingly more stringent lockdowns... but hey. Facism rules the planet. Go get some. _____________________________________________________ The Baltic Exchange's main sea freight index extended its slide on Thursday to hit the lowest in more than six weeks, hurt by falling rates across vessel segments. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, lost 68 points, or 2.8%, to 2,342 points. The capesize index fell 88 points, or about 3.6%, to 2,369 points. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $737 to $19,643. China's coal imports dropped in May after a strong rebound in the previous month, official data showed on Thursday, as cheap domestic sources and weak demand due to Beijing's zero-COVID curbs dented appetite for overseas cargoes. The panamax index dropped 73 points, or 2.7%, to 2,674 points. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased by $659 to $24,064. Dalian and Singapore iron ore futures slipped as traders continued to worry about weak profits at Chinese steel mills, with fresh COVID alerts in Shanghai and Beijing adding to concerns. The supramax index lost 58 points to 2,527 points. (Reuters - Reporting by Rahul Paswan; Editing by Vinay Dwivedi)
INDEX:BDI
by HK_L61
1
Baltic Dry Index UpdateThe Baltic Dry Index Continues to soar following my call for a breakout at 3,200ish (July 2021). I think the BDI remains a good indicator right now for a few reasons: 1. From a technical perspective, it is behaving exactly as expected (hence the call from 3,200 - it was an easy read) 2. The breakout and move higher is consistent with a bottleneck in global shipping 3. The #bullish price action is yet another harmonious variable in my view of the global macro repricing; although I am still treating the idea of "re-pricing" as a theory. I am going to not this as a continued long until we reach the 4,700 threshold; at that point, we can reassess.
INDEX:BDILong
by ChiefMacro
2