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Arjun G Nagarajan

@arjungn80

16 Jul

Have faith in the Fed. In his testimony to the Congress/Senate Banking Committee, Powell urged lawmakers to have faith in the Fed's judgement. The Fed Chair reiterated his message that inflation would stay elevated for a few more months before moderating...(1/6)

...and that it would be too risky to tighten policy too early. He said:
“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected or that anybody had expected. To the extent that it is temporary, then it would not...(2/6)

...be appropriate to react to that. But to the extent that it gets longer and longer, we’ll have to continue to revaluate the risks that would affect inflation expectations and would be of longer duration and that’s what we’re monitoring...”.
On the nature of...(3/6)

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Arjun G Nagarajan

@arjungn80

14 Jul

US inflation reaffirms 'transitory'. US inflation continued to rise and stood higher than expectations for a third month in a row. US inflation for the month of June stood at 5.4% y/y, much higher than market expectation of 4.9%. Core inflation also rose higher to...(1/8)

...4.5%, higher than the 4% consensus.
Why does this again reaffirm transitory for the Fed? This is mainly because the key drivers of inflation came from almost the same items seen in earlier months: used cars/trucks (45%), gasoline (45%), fuel oil (45%), utility...(2/8)

...gas service (16%) and transportation services (10%). These are almost entirely reflective of reopening of the economy and could moderate into the months ahead as the economy continues to normalise. July is a month when most of the US would be up and...(3/8)

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Arjun G Nagarajan

@arjungn80

14 Jul

Vaccines seem at work in the #UK. With every incremental day of contained deaths in the UK, the efficacy of the #vaccines in containing #COVID19 mortalities appears clearer. The infection and mortality curves in the UK make this fairly clear. While the infections curve...(1/6)

...in the UK continues to rise and is yet to see a peak, the daily fatalities have barely seen a pickup, compared to where it was the last time around. During the last wave, the mortality curve saw a pickup around a month or so after the infections curve. Looking...(2/6)

...at absolute numbers, the 7D average (7DAvg) of daily infections is now at 34k+ and the 7DAvg of daily deaths are at 30. During the last wave, on the rising part of the curve, when 7DAvg cases stood at 34k+ (25 Dec), the 7DAvg mortality stood at 480. This can be...(3/6)

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Arjun G Nagarajan

@arjungn80

12 Jul

Does the #US10Y yield puzzle affect India? An earlier tweet covered the various angles to the US10Y yield puzzle. The perceived softness around #USgrowth appears to stand-out as a prominent reason. During the same time last week, we saw a sharp rise in the Indian 10Y...(1/12)

...yield to 6.18%. This appears to have been on the back of the #RBI's surprising (disappointing for traders/underwriters) choice of picking relatively illiquid papers for its new tranche of G-SAP 2.0. The announcement of a new 10Y benchmark paper auctioned on...(2/12)

...Friday, with a higher traded yield was another reason. Are the US and Indian bond markets related in anyway? The answer is an obvious yes. Given that the US is a key global driver, the #Fed's policy rates naturally push monetary policy of emerging markets and...(3/12)

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Arjun G Nagarajan

@arjungn80

11 Jul

Five things that can keep crude prices in check. The conversation around crude prices will not be complete till one takes a closer look at the supply possibilities. The last tweet touched about Iran. Note here that the end of Iran sanctions is expected to bring...(1/7)

...about a near-term increase of 0.5-0.7mbpd of Iranian crude into global supply. It is interesting to learn that Iran used to export 2.4 mbpd, compared to the current level of 0.1 mbpd. Now, the numbers get even more interesting when one looks at US shale. The...(2/7)

...break-even for shale is around $60/bbl and for some smaller shale sources like Bakken, the break-even is even lower at around $45/bbl. Therefore, the longer crude prices stay elevated, higher is the probability/incentive for shale production to make a comeback. Total...(3/7)

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Arjun G Nagarajan

@arjungn80

9 Jul

Can crude really touch $100/bbl?. After initial commentary globally around the probability of $100/barrel on crude, the narrative appears to be moderating a bit. The global oil market that was in a surplus of 2mn barrels per day (mbpd) in 2020 and turned into a...(1/6)

...deficit of (1.6)mbpd during the first six months of this year 2021. This deficit is an artificial one, on account of the production cuts imposed by the OPEC+ to keep prices elevated. Commentators appear to increasingly feel that crude could peak around $80/bbl. Higher...(2/6)

...spare capacities and the attractiveness of selling at elevated crude prices on the one hand could lead to an increase in supply on the sidelines. On the other hand, experts see a realistic possibility of Iranian crude resumption by the end of this year. While...(3/6)

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