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Unexpected Challenges for the Fed's QT Plan.
Oman Becoming Major Energy Player.
Here is what we will be getting into today:
The Fed's Plan for QT Hits a Snag.
Oman Increasing Their Relevance in the Global Energy Landscape.
Organized Crime Targeting Cargo At Rising Rate.
Let's Dive In!
Website: Wolf Street
Title: Why the MBS Roll-off from Feds Balance Sheet Will Speed Up
Here are the key highlights:
The Federal Reserve's Quantitative Tightening (QT) plan was put in place last spring with the intention of reducing its balance sheet by limiting how much of its Treasury securities and Mortgage-Backed Securities (MBS) can roll off each month. The cap for Treasury securities has been set at $60 billion a month, while the cap for MBS has been set at $35 billion a month.
Despite these caps, the roll-off of MBS has been far lower than expected. Since June, the roll-off of MBS has amounted to only $103 billion total. This is in contrast to the allocated $95 billion monthly.
This is largely due to a decrease in both mortgage refinances and home sales from last year - mortgage refinances have dropped 80% while home sales have declined 34%.
With the start of the spring selling season there is hope that this will change. Sales volume usually increases during this time of year as people begin buying homes for summer vacations or relocating for new jobs. This increased volume means more mortgages are being paid off which leads to more pass-through principal payments being sent back to the Fed.
The Refinance Index released by the Mortgage Bankers Association also indicates an increase in refis from December's low levels - 77% - signaling an uptick in pass-through principal payments as well. Though it may not be enough to bring the MBS roll-off up to the cap set by QT, it will certainly get it closer as pass-through principal payments speed up over time. The Fed does not have a cash account like companies do; instead when they need money they create it and when they get paid they destroy it.
Overall, while QT was intended to reduce their balance sheet by limiting how much Treasury securities and MBS can roll off each month. This has not been achieved as planned due to decreased mortgage refinances and home sales from last year. With increasing sales volume over spring and summer, more mortgages should be paid off. This will increase MBS roll-offs but may not be enough to bring them up to QT's cap levels.
Title: Cargo Thefts Spike 15% Across US, Canada In 2022
Author: Noi Mahoney Link: Click Here
Here are the key highlights:
In 2022, cargo thefts across Canada and the U.S. surged to an estimated $223 million worth of stolen goods, according to recent data from CargoNet.
Cargo thefts mostly occur around major ports or intermodal facilities, distribution centers and truck stops. Most cargo thefts are committed by organized crime groups who are fulfilling orders for specific items such as electronics or energy drinks. New methods of theft have also emerged such as strategic thefts, identity theft, fictitious pickups and double brokering scams which have been seen more on the East coast.
California was the leader in cargo theft incidents with 417 thefts, followed by Texas with 223 and Florida with 153. Household goods were the most commonly stolen items, followed by electronics and food and beverage commodities. The average value of cargo stolen in a theft was $214,104, a 20% increase compared to 2021.
These groups will target anything that has retail purchasing restrictions. Products that have less supply due to inflation, supply chain issues or some form of product shortages will be targeted. Any product with high desirability & price that will go up is definitely going to be targeted.
Title: Key Chinese Middle Eastern Hub Switches Gas Supplies To Europe
Author: Simon Watkins Link: Click Here
Here are the key highlights:
In recent years, China and Russia have been attempting to gain control of the Middle East's oil and gas resources, strategic ports, and military and intelligence cooperation. This was part of the One Belt, One Road (OBOR) power-grab project and Vladimir Putin's plans to revive the Soviet Union.
However, a series of deals made by Middle Eastern countries with the U.S. and Europe in light of Russia's failure to achieve a quick victory in Ukraine are potentially reversing this trend. Last week's deal between Oman and Turkey is indicative of this emerging pattern.
Oman is significant to both Beijing and Moscow due to its geographical position on both the Gulf of Oman and the Arabian Sea, away from the Strait of Hormuz, through which passes at least one third of the world's crude oil supplies. It also has considerable liquefied natural gas (LNG) capabilities that are not fully utilized.
Iran has had its eye on utilizing this unused LNG capacity for nearly 10 years as part of a broader gas cooperation plan which would involve two elements:
First, Iran using at least 25 percent of Omans LNG capabilities.
Second, laying a pipeline between the two countries. The pipeline would comprise around 200 kilometres of 56-inch pipeline running from Rudan to Mobarak Mount in the southern Hormozgan province in Iran.
This could potentially enable Iran to become a world leading LNG exporter and would be key to dramatically increasing its ability to produce LNG. Oman LNG recently signed a major gas deal with Turkey, as well as two smaller deals with Thailand's PTT Global LNG and France's TotalEnergies to supply 6 million metric tonnes of LNG annually, starting in 2025 and a long-term agreement with three Japanese companies - JERA Co, Mitsui & Co, and Itochu Corporation.
Turkey's Energy and Natural Resources Minister Fatih Donmez expressed that this agreement with Oman will provide Turkey with an opportunity to become a gas trade center at a time when Europe is suffering from gas supply problems. The CEO of Oman LNG, Hamed al Naamany, further commented that this agreement is part of their commitment to add value to the local economy through growth and collaborations with international partners such as BOTAS.
The recent deals demonstrate Oman's fluidity in dealing with both NATO countries on the one hand and Russia on the other. All deals have been with companies not associated with either Russia or China or any of their proxies. This indicates that Oman is looking to diversify its energy sources and increase its presence in the global energy market.
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