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Oil 

• Oil is down more than 5% as volatility continues 
• WTI crude is down below $108 on the day 
• It’s not uncommon to see 4-5 percent swings in oil prices these days, and today is no exception. 
• Oil is dragging lower to begin the new week, as concerns grow following Shanghai’s nine-day lockdown. Growing concerns about the global economy are also contributing, but, once again, market volatility makes it difficult to read into market know-how. 
• The current price range for oil appears to be between $95 and $125, and this appears to be where we are now. The wide range allows for greater volatility swings, such as the one we are witnessing today.
• In the long run, as long as geopolitics remain a concern, it is difficult to argue against a significant drop in oil prices. Many countries will have to look elsewhere for supply in an already tight market with extremely low global inventories as a result of the diversification away from Russian oil.
• Add to that the ongoing push toward a green transition in the larger picture, and you have a recipe for structurally supporting oil prices.

BOE

• In his remarks, BOE’s Bailey stated, “We are beginning to see evidence of a growth slowdown.” 
• Andrew Bailey, the CEO of the BOE, made the following remarks. 
• There are risks in both directions for the outlook  There is a large trade-off between inflation and output.
• It is appropriate to tighten policy in these circumstances
• However, there are risks on both sides of inflation • The change in language on rates outlook reflected the level of uncertainty, risks, and volatility 
• In case you’re wondering what the language change that Bailey is referring to is, we’ve got you covered. 
• As previously stated, the BOE seeks greater flexibility, which is only reinforced by Bailey’s constant reiteration above on two-sided risks.
• But, in terms of the pound and interest rates, it’s not clear that the tightening cycle can continue unabated.
• Inflation remains the main concern, but with a cost-of-living crisis looming in the UK, the BOE will find it difficult to strike a balance.

Russia

• Russia claims that there has been no significant progress in talks with Ukraine. Remarks from the Kremlin 
• Talks will take place in Turkey this week, but they are unlikely to begin today 
• Talks could begin as soon as tomorrow. There have been no significant achievements or breakthroughs in the negotiations. When it comes to the possibility of a Putin-Zelensky meeting, there has been no progress. 
• That has been evident in recent weeks, and it appears that the same type of communication will continue for the time being. Meanwhile, the situation on the ground remains tense as Russia attempts to take over Mariupol for the time being.

Bond 

• The bond rout continues, and the Treasury yield curve flattens even more. 
• 2s10s is currently closing in on 10 bps 
• The inversion of the 5s30s in the Treasury yield curve has been one of the day’s hot topics. 5-year yields have risen to 2.64 percent, while 30-year yields have risen to 2.63 percent. Historically, that has been an indicator of a two-year recession, but to be honest, I find 2s10s to be the more appealing one. In that case, the spread has shrunk to just 10 basis points on the day, with 2-year yields rising by more than 10.5 basis points to 2.40 percent.
• The charts continue to show that it will be difficult to predict where the bond market rout will end and, in the worst-case scenario, whether the bubble will burst. But, for the time being, recession indicators are presenting new risks to markets, which should be avoided in the short term.