90 seconds @ 9am Commodity supercycle building

Kia Ora, I’m David Chaston and this is ninety at nine, brought to you by interest.co.nz.

This is where you get everything you need to know in ninety seconds – with news prices are jolting higher for both hard and soft commodities.

But first, new orders for US durable goods orders came in with a very disappointing result in March, up just +0.5% when a strong +2.5% result was expected.

Orders for non-defense capital goods fell a worrying -4.7%. These results are a little curious, given the strong PMIs and the upbeat regional Fed factory surveys.

In fact, the Dallas Fed reported results for its region for April, and that revealed very upbeat factory conditions, and with a strong outlook.

The latest UST 5yr Note auction for US$61 bln was very well supported with US$141 bln of bids.

China’s largest distressed debt manager, China Huarong, has announced it will miss another results disclosure deadline, further unsettling bond investors and raising fresh concerns over a potential default.

The company owes bondholders the equivalent of US$42 bln, with US$17 bln of that falling due by the end of next year.

Singapore’s industrial production in March also came in with a disappointing result, well below expectations. The year-on-year result was pandemic affected, but the gain from February wasn’t flash at all and developing a softening trend. Without strong gains in their electronics industries, this would have been a terrible overall result.

The prices of hard commodities are rising, and actually approaching levels of the last commodity super cycle. Prices for iron ore, aluminium, and copper are at decade highs. Copper – a bellwether for the global economy – rose as much as +2.4% to US$9,780/MT, the highest since August 2011.

And this trend may only just be starting, juiced along by global stimulus, and further by the transition to a de-carboned economy that will require vast amounts of copper.

Worldwide, crop prices are also soaring, with bad crop weather in key-producing regions the major culprit – especially in North America, South America, Russia and Europe. It comes as Chinese demand is high and getting higher. Jolting food inflation is on its way too.

The UST 10yr yield starts today at 1.57%, up +1 bps overnight.

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