James Hamilton of Econbrowser provides an interesting piece on how big a contribution could oil speculation be making? … his conclusion:
We were only able to buy 19.9 mb/d in the first quarter when we offered a price near $100. So why would it have been possible to secure the 21 mb/d that consumers would likely have wanted at a price of $72?
Given these data, I think it is impossible to argue that the volume of futures market purchases alone could be the reason why oil prices went up this year. A key and necessary element of any speculation-based interpretation must be some explanation for the factors governing the physical quantity of oil being supplied to the market.
We’re hearing from a number of experts asserting that there’s no reason why the oil price should have gone up. I wish one of them would tell me where an extra million barrels per day in supply is supposed to come from.
Accrued Interest looks at the question of oil prices and their relationship to general inflation:
So over a period of three decades, it was rare that a move in Core CPI would not be mirrored in headline CPI. If one was elevated, the other was elevated. If one was tame, the other was tame.
However, the 21st century hasn’t followed the same pattern. From 2000-2008, the correlation between total CPI and Core CPI has broken down: only 7.6% measured monthly and 21.4% measured annually. This despite the energy portion of CPI rising at a 1970’s style 9.5% annualized. During the current decade, there has been no particular relationship between total inflation and core inflation.
What does this mean? The data is telling you that rising energy and food prices have been due to supply and demand conditions in those markets. Not classic inflation, which is a monetary phenomenon. In other words, rising oil is indeed due to strong demand from emerging markets and a lack of new supply. Not the weak dollar or loose monetary policy.
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 | |||||||
| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | 4.23% | 4.25% | 49,839 | 16.92 | 1 | -0.1179% | 1,114.1 |
| Fixed-Floater | 4.80% | 4.54% | 62,691 | 16.17 | 7 | +0.0877% | 1,045.2 |
| Floater | 4.10% | 4.10% | 71,263 | 17.21 | 2 | -1.9324% | 934.5 |
| Op. Retract | 4.87% | 2.69% | 85,637 | 2.74 | 15 | -0.1430% | 1,052.1 |
| Split-Share | 5.32% | 5.79% | 66,645 | 4.13 | 15 | +0.2725% | 1,046.3 |
| Interest Bearing | 6.12% | 4.47% | 47,237 | 2.29 | 3 | -0.2300% | 1,118.5 |
| Perpetual-Premium | 5.91% | 4.55% | 342,014 | 9.55 | 13 | +0.0902% | 1,016.2 |
| Perpetual-Discount | 5.95% | 6.01% | 221,425 | 13.87 | 59 | -0.0314% | 884.3 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| BAM.PR.B | Floater | -2.4096% | |
| SLF.PR.C | PerpetualDiscount | -2.0408% | Now with a pre-tax bid-YTW of 5.98% based on a bid of 18.72 and a limitMaturity. |
| BAM.PR.J | OpRet | -1.6701% | Now with a pre-tax bid-YTW of 6.23% based on a bid of 23.55 and a softMaturity 2018-3-30 at 25.00. |
| PWF.PR.F | PerpetualDiscount | -1.4759% | Now with a pre-tax bid-YTW of 6.07% based on a bid of 22.03 and a limitMaturity. |
| BAM.PR.K | Floater | -1.4563% | |
| BAM.PR.H | OpRet | -1.3540% | Now with a pre-tax bid-YTW of 5.17% based on a bid of 25.50 and a softMaturity 2012-3-30 at 25.00. |
| CIU.PR.A | PerpetualDiscount | -1.2500% | Now with a pre-tax bid-YTW of 5.89% based on a bid of 19.75 and a limitMaturity. |
| CM.PR.H | PerpetualDiscount | -1.2152% | Now with a pre-tax bid-YTW of 6.25% based on a bid of 19.21 and a limitMaturity. |
| CM.PR.E | PerpetualDiscount | -1.2002% | Now with a pre-tax bid-YTW of 6.16% based on a bid of 22.70 and a limitMaturity. |
| CM.PR.D | PerpetualDiscount | -1.1615% | Now with a pre-tax bid-YTW of 6.10% based on a bid of 23.52 and a limitMaturity. |
| MFC.PR.C | OpRet | -1.1000% | Now with a pre-tax bid-YTW of 5.73% based on a bid of 19.78 and a limitMaturity. |
| STW.PR.A | InterestBearing | -1.0827% | Asset coverage of 1.8+:1 as of June 19 according to Middlefield Group Now with a pre-tax bid-YTW of 6.52% (mostly as interest) based on a bid of 10.05 and a hardMaturity 2009-12-31 at 10.00. |
| PWF.PR.E | PerpetualDiscount | +1.0270% | Now with a pre-tax bid-YTW of 5.88% based on a bid of 23.61 and a limitMaturity. |
| NA.PR.K | PerpetualDiscount | +1.0395% | Now with a pre-tax bid-YTW of 6.10% based on a bid of 24.30 and a limitMaturity. |
| BNA.PR.C | SplitShare | +1.1777% | Asset coverage of just under 3.6:1 as of May 31 according to the company Now with a pre-tax bid-YTW of 7.30% based on a bid of 19.76 and a hardMaturity 2019-1-10 at 25.00. |
| BAM.PR.N | PerpetualDiscount | +1.3309% | Now with a pre-tax bid-YTW of 7.14% based on a bid of 16.75 and a limitMaturity. |
| IAG.PR.A | PerpetualDiscount | +2.1053% | Now with a pre-tax bid-YTW of 5.97% based on a bid of 19.40 and a limitMaturity. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| PWF.PR.J | OpRet | 103,000 | Desjardins crossed 100,000 at 25.71. Now with a pre-tax bid-YTW of 4.26% based on a bid of 25.71 and a softMaturity 2013-7-30 at 25.00. |
| PWF.PR.K | PerpetualDiscount | 57,025 | RBC crossed 50,000 at 20.65. Now with a pre-tax bid-YTW of 6.09% based on a bid of 20.70 and a limitMaturity. |
| SLF.PR.D | PerpetualDiscount | 50,767 | Now with a pre-tax bid-YTW of 6.10% based on a bid of 18.35 and a limitMaturity. |
| HSB.PR.D | PerpetualDiscount | 32,675 | RBC crossed 25,000 at 20.90. Now with a pre-tax bid-YTW of 6.03% based on a bid of 20.85 and a limitMaturity. |
| MFC.PR.B | PerpetualDiscount | 31,400 | RBC bought 10,000 from Nesbitt at 20.36, then crossed 10,000 at 20.40. Now with a pre-tax bid-YTW of 5.76% based on a bid of 20.35 and a limitMaturity. |
There were thirty other index-included $25-pv-equivalent issues trading over 10,000 shares today.