SPEAKER_01 0:00

Right now, Wall Street is uh aggressively betting on a September interest rate cut. Like they are completely convinced it is happening. But the physical world, things like tanker strikes, paralyzed mines, and soaring oil, it's basically screaming that inflation is about to surge again. So welcome to today's deep dive into the August 11, 2026 pre-market briefing from Eli Levy at Canon Trading Company. We are well, we're looking at this brutal tug of war today between monetary theory and physical reality.

SPEAKER_00 0:28

Aaron Powell Yeah, it really is a fascinating disconnect because you have futures markets pricing in, you know, near certain relief from the Fed, while the global supply chain is essentially signaling that the inflation fight is uh far from over. It's like they're looking at two completely different planets.

SPEAKER_01 0:42

Exactly. The data just doesn't line up at all. But you know, before we really get into how these two realities are crashing into each other, I do need to read this exactly as provided for you listening. Disclaimer. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

SPEAKER_00 1:23

Definitely important to keep that risk in mind. And you know, to really understand this paradox, we have to start with the tape's biggest driver today, which is energy.

SPEAKER_01 1:30

Trevor Burrus, Jr.: Oh, for sure. I mean, Brent Crude just surged nearly five percent, right?

SPEAKER_00 1:34

Trevor Burrus, Jr. Exactly. And it is because of all these geopolitical catalysts piling up at once. That oil premium is, well, it's bleeding directly into an inflation risk premium in the bond market. Aaron Powell Yeah.

SPEAKER_01 1:45

And those catalysts are moving fast. We've got the stalled U.S. Iran traffic scheme in the Strait of Hormuz, plus uh there's that tanker strike that the UAE is pinning directly on Iran.

SPEAKER_00 1:54

Aaron Powell Right. And you have to add the Ukrainian strikes on Russian refineries to that mix, too. So we're seeing this physical constraint drive what bond traders call a bare steepener.

SPEAKER_01 2:05

Aaron Powell Wait, let's clarify that mechanism for a second, because the 10-year treasury yield, it literally just hit a fresh month-to-date high of 4.73 percent.

SPEAKER_00 2:14

Aaron Powell Yeah. So a bare steepener is basically where long-term bond yields start rising faster than short-term ones.

SPEAKER_01 2:19

Aaron Powell Got it. So bond investors are demanding like much higher compensation for taking on long-term inflation risk from all these energy shocks.

SPEAKER_00 2:28

Aaron Powell Precisely. It's like uh the Fed is trying to tap the brakes on the economy with rates, but global supply chains are secretly stepping on the gas right underneath them.

SPEAKER_01 2:36

Aaron Powell Which brings us to the crazy math here. Because Fed funds futures are showing this massive, like 91% probability of a rate cut this September.

SPEAKER_00 2:45

Yeah. It's wild.

SPEAKER_01 2:46

So if cuts are basically locked in, why is that long end of the yield curve climbing so fast?

SPEAKER_00 2:51

Well, because the bond market is looking past oil. They're seeing a massive structural deficit across industrial metals, too. Take copper, for instance.

SPEAKER_01 3:01

Right. The copper squeeze.

SPEAKER_00 3:02

Exactly. We're seeing completely disparate events just choking supply all at once. Like Chile's El Teniente mine had to completely halt expansion because of seismic issues.

SPEAKER_01 3:13

Oh wow. Earthquakes disrupting a major mine.

SPEAKER_00 3:15

Yeah, you can't predict that. And at the exact same time, the Democratic Republic of Congo slapped an export ban on copper and cobalt concentrates.

SPEAKER_01 3:24

And then you add the total wildcard to the mix, which is China just banning sulfuric acid exports.

SPEAKER_00 3:29

Aaron Powell Right, which removes roughly a quarter of the global acid supply overnight.

SPEAKER_01 3:33

Trevor Burrus, which sounds completely unrelated until you realize uh sulfuric acid is absolutely critical for smelting and processing copper ore. You literally can't get the refined metal without it.

SPEAKER_00 3:45

Exactly. So this deficit narrative holds up completely, regardless of whether the Fed cuts rates or not. Physical scarcity, you know, it just doesn't care about the federal funds rate.

SPEAKER_01 3:54

So true. So we have the futures market betting on rate cuts and the physical market threatening inflation. And tomorrow is the day those two opposing realities actually crash into each other on the economic calendar.

SPEAKER_00 4:06

Yeah. Tomorrow morning we get the July CPI print, and that is going to be the ultimate pivot point for the yield curve.

SPEAKER_01 4:12

Aaron Powell Because the market finally has to decide if that 91% probability of a cut is actually justified by the real inflation data.

SPEAKER_00 4:20

Spot on. And then at noon, the August Waste report drops.

SPEAKER_01 4:24

Ah, yes. The WASTE report. And this is the first agricultural report of the season to use actual field survey yields rather than just, you know, statistical models. So it notoriously moves the market.

SPEAKER_00 4:36

Heavily. Especially because if you look at managed money positioning right now, they are heavily short on soybeans.

SPEAKER_01 4:41

So if those field survey numbers come in tighter than expected, are we staring at a massive squeeze risk?

SPEAKER_00 4:47

Oh, absolutely. The mechanics of that are brutal. If the data shows tight supply, prices jump, and all those funds positioned on the short side are suddenly underwater.

SPEAKER_01 4:54

Aaron Powell Which forces them to buy soybeans rapidly to cover their positions, right? Which only drives the price up even sharder.

SPEAKER_00 5:01

Exactly. It just becomes this aggressive feedback loop.

SPEAKER_01 5:04

Aaron Powell It really is a perfect storm of data testing this market paradox. You know, if supply-side constraints from paralyzed copper mines in Chile to geopolitical strikes in the Middle East are what is actually driving prices higher, it begs a much larger question for you to think about.

SPEAKER_00 5:21

Yeah. Are we entering an era where physical commodities dictate inflation more than central bank policies? Because if supply chains stay this fragile, the Fed's interest rate lever might start looking incredibly weak.

SPEAKER_01 5:33

Aaron Powell Such a massive shift to keep in mind as tomorrow's numbers roll in. Huge thanks to Eli Levy for the source material today. You can reach the author directly at Eli at Canon Trading.com and credit to Canon Trading Company for the excellent briefing.

SPEAKER_00 5:46

Definitely a really great read to prepare for the week.

SPEAKER_01 5:49

And to wrap up our deep dive today, disclaimer Trading Futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change anytime.