Two Software Recovery Plays

There’s been a lot of talk about the consistent march higher in global bond yields.

US 30-year bond yields are testing multi-decade highs above 5.25%, and it looks like the administration is getting nervous. Scott Bessent, the US Secretary of the Treasury, announced that they are doubling the size of buybacks on longer-dated securities.

That worked for a day, with 30-year bond yields falling 10 bps to 5.18%, but they jumped back up to 5.25% the next day.

So, we are entering a game of cat and mouse with the US government trying to massage yields lower through interventions.

I don’t like their chances. If the 30-year yield pops above 5.33% in the next few weeks, who knows how high it will go.

The intervention triggered a chain reaction: a falling US dollar and a spike in gold, silver, and Bitcoin.

Oil prices are also marching higher, and there was news this week that the diesel crack spread, which indicates the margins refiners receive for ‘cracking’ crude oil and turning it into diesel, jumped above US$1.00 for the first time on record.

So even though oil prices have seemed fairly contained recently, the serious consequences of the war in Iran are starting to show up.

Diesel is, of course, the lifeblood of the agricultural sector. Fertilisers are also disrupted by the war in Iran. Add in a drought affecting European and UK crops, and a drop in Ukraine and Russia’s grain exports and there is a perfect storm brewing.

But all is not doom and gloom.

Stocks continue to hold near all-time highs, and there are genuinely interesting opportunities emerging in stocks battered by the Saaspocalypse.

Charlie and I discuss all of the above and try to end on a cheery note by pointing out two US stocks that look ready to rumble.

Closing Bell