Mine Print Hash

Large reduction in open interest on long-end UST futures in Monday's session. Pink & Cyan bars represent long end UST futures in screenshot below. Think of this like one cat from the litter in Bassman's "A Fat Cat in a Small Door" post getting through ... and so far all OK. This could represent the beginning of a broader liquidation ... or an orderly risk reduction that defuses/prevents one. Alternatively, there's a competing explanation that Dallas Fed researchers presented in a research note last week that proposes structural capital flows as a root cause, where falling UST futures activity reflects a shift away from the cash-futures basis trade towards swap-spread trades. If that alternate explanation holds true, the authors suggest we may be seeing a structural change in how & where long-duration risk is intermediated (from futures to swaps) and the developments we're seeing is not solely the beginning of a disorderly liquidation process but a bigger structural change. Look at Monday's OI development as a test run for a packed calendar the next 5-6 weeks for the long end to navigate: (1) 20 year auction tomorrow (10/21) (2) elections (11/3) (3) QRA (11/4) (4) Dec-to-Mar ZB & WN (last week of Nov) With the selloff in $CRWV senior unsecured debt showing the importance of long-term capital access to the firms involved in the AI buildout, I would not be surprised to see companies in this sector building their own experts on staff to ensure undisrupted access to credit markets in the coming years as availability, terms, and pricing of available credit becomes just as important of a bottleneck as your GPUs, rackspace, transformers, electricity, etc.

We all obviously recognize the world is rapidly changing, but our perfectly understandable distaste for volatility and violence can muddle and prevent us from comprehending the world that “is” rather than what we think it “ought” to be. Start from the “reserve currency” subject in #4 and work backwards: 4. Iran is part of a much bigger operational dismantling & reorganization of the old offshore dollar system. Because supply chains in the real economy make up the base layer collateral of the financial economy, the breakup and reforming of marketing relationships in energy commodities like oil from the Persian Gulf or natural gas from Siberia is the other side of the coin to this financial transition. 3. Bessent is fully aware that we can’t go through this transition process without some kinetics. The open-ended variable is the amount of violence this process consumes. It is obvious when comparing different leaders’ actions on the global stage that some want to see it minimized, while others want to ratchet up into a much bigger and destructive conflagration. 2. Think about the financing of the war & conflict from the frame of opposing sides of the negotiation table for the biggest of all businesses that we talked about in #1: the dual global financial and trade franchises. From where we stand today, it is crystal clear that one faction wants out of the legacy system that puts the American sovereign in a $40T debt hole, while the other makes its living off the rents of the old status quo. 1. The pressure on Iranian airlines this week is just the latest development in this financial and supply chains context: the first-order financial and export chains for Iranian oil in the old system have already been broken down. Domestic prices for refined products in Iran have collapsed to $0.11 to $0.14 a gallon. International flights offer a path for the “status quo” business operators to arb some of their lost economic profits back, in meaningful size: transform your product (oil) into a higher order service (airline transport), pulling in external revenue while undercutting higher input prices in the rest of world. The problem with this is a whole lot of players are fed up with the bullshit of the old offshore dollar system, and like the U.S. have decided they too want to move on from the old to the next thing. Contrary to OP, there’s a large contingency on that side of the table who understand the bigger picture of what’s going on and, while acknowledging that we’re in the fog of war, would assess that Bessent is, in fact, not a total retard.

I think they’re signaling we’re shifting into a Hjalmar Schacht-style / “Princes of the Yen” type of Quantitative Credit Guidance (QGC) framework. Watch the @MinePrintHash episode that @CameronOtsuka and I recorded this afternoon for an intro background (will release by EOD).

They did pretty much the exact opposite of walk out: the European Commission gave their stamp of approval for Operation Economic Outcast in their statement for Asheville. ec.europa.eu/commission/pres…

One way or the other, it looks like a joint communiqué out of the G20 Finance Ministerial will need to do some heavy lifting: