Daily Market Color

Russian Crude Banned by US and UK

Inevitable ban of Russian crude sends implied inflation rates soaring. Breakeven inflation rates gapped higher today as markets digested the US and UK’s decisions to ban Russian oil and gas. Although the move was not mirrored by the EU, which instead announced a reduction in Russian imports, breakeven inflation rates rose by 0.08%-0.15%. The 10-year breakeven rate sits at 2.93% as of market close- the widest its been in decades. Meanwhile, nominal swap rates and Treasury yields were higher once again, 2-year Treasury yields climbing to 1.60% (near YTD highs) while the 10-year clawed back to 1.85%.

Stocks fall for fourth day, crude rises to $129. The announced curbs on Russian oil and continued bombardment of Kyiv sent crude oil higher once again- the commodity rising 3.9% on the day to end near $129/barrel. US equities were under threat once again as well, all three major indices declining on the day, the S&P 500 leading the way lower to close at 4170. The VIX pulled back modestly but remained elevated at 35.13.

London Metal Exchange halts nickel trading. The LME suspended nickel trading today in a remarkable move that illustrated the potential market disruptions that can occur during times of high volatility. The LME’s decision aimed to stabilize the market after the metal rose above $100,000 / ton- an all-time high for the commodity. Russia is by far the world’s biggest exporter of nickel, and the invasion of Ukraine has many speculating that the market will undergo a supply shock.

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