ivanlabrie

Tuesday's settle had the odds of a 28 October hike at 15.5%, down from 18.8% the session before, and there's still no cut priced at any meeting out to December 2027. At those odds I think next week's FOMC is likely a hold, and for $XAU and $BTC the bigger variable going into it is what the long end of the Treasury curve does.
Why the long end
Gold and Bitcoin pay no cash flow, so you discount them at the long real yield, and when that rises they've got nothing to offset it with. I read Bitcoin as the purest duration asset in the market, with gold close behind it. You could see it on 1 September and again on 15-16 September, when the assets with no cash flow were the first to give as yields climbed.
What's priced for the Fed
The Fed hiked 25bp to 3.75-4.00% on 16 September, 12-0, and the dots put the median at 4.1% for both end-2026 and end-2027, with cuts only from 2028. Tuesday's settle has 1.04 hikes by December, 1.50 by January, 2.56 by April 2027 and 3.19 by October 2027. The front got a little less hawkish on the day while the back of the strip added, 3.11 to 3.19 by next October.
Warsh said on 16 October that the data had broadly conformed with what the Fed expected when it hiked. I read that as taking the urgency off the 28th while leaving October and December both open, which fits a front-month number in the teens. Every voter who's spoken since the hike leans to a hike or a hold... Hammack thinks conditions aren't restrictive and wants to move quicker, and Waller thinks higher yields are already doing some of the work. There's no new dot plot at this meeting either, that comes on 8-9 December.
Where the yield move came from
The ACM model had the 10-year term premium at +80.0bp on 19 October, the 99th percentile since 2015. Kim-Wright had it at +98.6bp on 16 October, the 100th percentile since 2015, so both models have it at the top of their post-2015 range.
ACM splits the move differently depending on how far back you look. Over the past year the fitted 10-year rose 105.8bp and term premium was about a quarter of it, so most of that was the market pricing a higher Fed path. Over the past month it rose 15.3bp and term premium was 110% of the move, which means the expected path actually fell and the premium did more than all the work. Over the last week the 10-year fell 10.4bp and 10.3bp of that was term premium coming back out.
So the recent swings, both ways, have come from the extra yield investors want for holding long bonds, and that responds to supply and to who's buying. At his September press conference Warsh listed government supply, weak savings, defence spending and capex among the reasons for higher long yields (hyperscalers competing for capital included), and on 16 October he named the AI build as one of the things pushing inflation up. I think the AI financing story that $QQQ trades is as much a bond-market story as an equity one, and Warsh has pointed at it twice now.
The 20-year kink
The 20-year now yields more than the 30-year, and today's $13bn 20-year auction is the long end's test this week. Bond volatility is off its peak but still higher than for most of the year, and my liquidity gauge reads worse than it did in September. I'd want both lower before calling liquidity back.
The case the other way
The data under the headlines is softer than the inflation prints. September PPI rose 1.3% on the month, but producer energy was +10.8% and core goods only +0.3%, so the oil move hasn't reached core goods yet. The retail sales control group rose only 0.1%, and the Beige Book had just 2 of 12 districts growing. Canada looks the same, with September CPI up to 3.1% on oil while the Bank of Canada's core measures averaged 1.85%, their lowest in six years.
There's a fair counter to the term-premium read too. Back in August, US nominal income was growing about 4.5% a year against a 30-year near 5.3%, and on that framing the long end looked like a buy. Bonds did rally on 15 October during the AI-debt selloff, with the long end gaining more than the front, and I read that flattening as growth worry.
On gold itself, the monthly downtrend runs out in October without having reached its target, and I count that as a bullish variable. There's no weekly signal yet.
What's dated
Thursday has jobless claims, the leading index and a 5-year TIPS auction, and Friday the flash PMIs. The FOMC meets 27-28 October with Warsh's press conference, the BoJ decides on the 30th after Ueda said more hikes are coming with the pace tied to the yen, and the October monthly bar closes on the 31st, the same day as the Mt. Gox deadline. The US midterms are on 3 November.
At 15.5% the decision itself probably won't move much, so I think the press conference and how the 2027 strip trades around it could count for more with gold and Bitcoin than the rate call. A BoJ hike without a stated pace hasn't threatened the yen carry trade so far. One that comes with a pace might be a different story.
I'll be watching the result of today's 20-year auction and whether the ACM term premium keeps climbing into the 28th.
#Fed #FOMC #Gold #Bonds #Macro

The November diesel crack added $8.47 to $113.10 on the 13 October session while December $BZ Brent fell 0.90% to 105.69. I think that split is the most useful thing in oil right now, because the IEA's October Oil Market Report puts the shortage in refining, and that decides which headlines could actually fix it.
What the crack is telling you
The crack is roughly what a refiner earns turning a barrel of crude into diesel. November ULSD futures closed at 4.9344 a gallon on the 13th with November $CL WTI at 94.14, and the IEA says diesel benchmarks "remain roughly double crude prices" even after easing from September peaks above $200 a barrel.
On the same session ULSD rose 4.47% and WTI 0.43%... and the gasoline crack went the other way, down $2.15 to $42.36. Two products off the same barrel moved $10.62 apart in one day, which is why I track gasoline and diesel separately.
The diesel crack printed $113.59 on 8 October, so Tuesday's $113.10 sits 49 cents under it and isn't a new high. Energy equities are at the top of the month too, with $XLE at 67.2, up 1.80% on the session and 9.27% since 30 September.
What the IEA said
The IEA says restricted middle distillate supply is "likely to persist well into 2027". Diesel exports fell 700 kb/d year on year in September, availability was cut by 1.5 mb/d in the second quarter and 1.7 mb/d in the third, and diesel accounts for 25% of the drop in global oil demand.
Its balances have 2026 demand down 2.6 mb/d, with world supply still running 1.73 mb/d below demand this year. A deficit alongside a demand decline means supply fell by more than demand did. The projected gap is slightly narrower than last month's, and that's the one line in the report pointing the other way.
Moscow has been easing its diesel export curbs, and the IEA thinks that's unlikely to materially change the global gasoil balance, because what binds is how much diesel Russia's refineries can physically make. Ukraine says it hit twelve Russian refineries in September, and Zelensky says it's held off for the two days after 11 October... a pause only stops new damage piling up, and the units already hit still need repairing.
Why crude can slip on the same tape
That's how Brent can fall on a day diesel rips. A crude headline changes the input side, and a shortage that sits in refining doesn't care much where the crude comes from. It works the other way too. OPEC says OPEC+ crude output rose 900,000 b/d in September to 39.07 mb/d, and I think that does little for diesel while the refining that turns crude into diesel is the bottleneck.
OPEC sees a different year
OPEC's monthly on 13 October cut its 2026 demand growth to +180,000 b/d from +380,000 and raised 2027 growth to 2.55 mb/d from 2.36, while the IEA has 2026 demand falling 2.6 mb/d, so the two can't both be describing the same year.
Why it reaches rates
Diesel is the part of energy that lands in freight, farming and anything that moves on a truck, and at the September press conference Warsh named crack spreads among his reasons for higher long yields. I've read the cost-push chain as weaker through crude and stronger through products and refining since August. With September core CPI at +0.3% against 0.2% expected this morning, I think the Fed has less room to look through an energy input that lasts, and if the IEA is right about 2027 this one could sit in the numbers for several more prints.
What's dated
The IEA governing board meets Thursday 15 October. Members hold about 1.1 billion barrels of public emergency stocks, over 200 mb of it diesel. The ~100 mb being discussed is the unreleased remainder of an action already announced, so it adds no new barrels and only pulls the clock forward, which is how JPMorgan reads it too. A dated schedule with actual diesel volumes is the outcome that could pull the crack down, and I'd be a little surprised if the agency that just wrote "well into 2027" produced one big enough to do it.
Before that, API reports tonight at 16:30 EDT, and the delayed EIA weekly lands Thursday at noon EDT with the distillate stock figure, last at 105.1 mb for the week to 2 October. Russia's export ban for direct producers runs to 31 October.
I'll be watching whether the crack gets back over the $113.59 of 8 October once the board has met, and whether Brent keeps lagging it.
#Oil #Diesel #Energy #IEA #Macro