• 2 minutes U.S. Presidential Elections Status - Electoral Votes
  • 5 minutes “Cushing Oil Inventories Are Soaring Again” By Tsvetana Paraskova
  • 7 minutes United States LNG Exports Reach Third Place
  • 3 hours Here it is, the actual Complaint filed by Dominion Voting Machines against Sydney Powell
  • 38 mins Pollster Frank Luntz released a poll today showing 90% of those that voted for Trump in November would vote for him again.
  • 15 hours A Message from President Donald J. Trump - 5 minutes from The White House directly
  • 43 mins ICE Engines Hear to Stay Regardless of War Against
  • 3 hours Do Republicans like Liz Cheney, Adam Kinzinger, Mitt Romney and now McConnell think voting for Impeachment can save the party ? Without Trump base what is the Republican constituency ? It's over.
  • 21 hours The World Economic Forum & Davos - Setting the agenda on fossil fuels, global regulations, etc.
  • 23 hours Minerals, Mining and Industrial Ecology
  • 3 hours Tonight Twitter took down Trump's personal account permanently. Trump responded on the POTUS account.
  • 9 hours Evidence is evidence, voter fraud by state
  • 11 hours One drawback of an EV . . . .
  • 20 hours Fast Car Charge Costs More Than Gas (?)
  • 1 day a In 2020, we produced and delivered half a million cars.
  • 1 day Supreme Court of BC dismisses Dr Michael Mann’s defamation lawsuit vs. Canadian climate skeptic Dr Tim Ball.
Another OPEC Producer Looks To Back The Aramco IPO

Another OPEC Producer Looks To Back The Aramco IPO

As the world’s largest initial…

What The Market Is Overlooking In The Occidental Deal

What The Market Is Overlooking In The Occidental Deal

Occidental Petroleum has caught a…

Why Nikola Was Never Actually A Tesla Challenger

Why Nikola Was Never Actually A Tesla Challenger

Nikola took the markets by…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Premium Content

Why Financial Markets don’t Follow the Old Rules Anymore

My favourite moment of the working day is doing a dot-to-dot. And it happens every morning, after booting up my computer; I look across the various asset classes, and start connecting the dots.

After the first few screens, it becomes progressively easier to predict what is coming next: dollar down = risk on, equities up = bond prices down, risk off = metals down. But joining the dots has gone askew recently. So from the starting point of mortgage rates to a crude conclusion, here’s how joining the dots isn’t as simple as going from A to B.

Whether financial markets float your boat or not, what is a useful thing to know if you have a mortgage, want to buy a house, or want to refinance, is the biggest influence on mortgage rates. And while logic dictates that a 30-year government bond would be a decent guide for a 30-year mortgage rate, that would be somewhat inaccurate. It is actually a 10-year treasury bond:

30 year mortgage rate

Related article: Does Suncor Energy Offer a Good Investment?

It is also fair to say that mortgage rates are low when times are hard, with low interest rates to stimulate borrowing and bond yields driven lower by a flight to safety.

It is also fair to say that as optimism in the economy improves, greater risk appetite should mean bond yields (and mortgage rates) should rise, and equities should see a corresponding rally.

And we have. That is, until the past few months, when we have seen the two diverge:

10 year treasury yield

So what does this mean? Well, at the crux of it, one of the markets appears to be wrong.

Falling bond yields indicate the battening down of hatches, while equities indicate better times ahead. And what is doubly interesting is that commodities – and specifically oil, which has taken part in the risk-on trade for much of the recovery of the last few years – is diverging also:

Related article: Unconventional Investments in Oil Sands Companies

Brent Crude Oil

Which leaves us at a fascinating juncture. Either commodities/bonds are correct, or the equity market is. Regardless, one is lagging, and will likely experience a significant correction in the coming months – be it equities tumbling, or commodities/bond yields melting up. Or even a bit of both.

Either way, today sees the S&P500 within grasping distance of a new record high, while on the same day mortgage rates are making record lows. The dots, for now…….do not connect.

By. Matt Smith


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News