Tag: Uranium

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Bond Market Deja Vu from 2022

Key Points

  • Investors are dumping long-term government bonds, with the yield on 30-year Treasuries rising to 5.13%.
  • Sovereign bonds across the UK, the EU, and Japan are all affected by the sell-off.
  • The S&P 500 and the Dow retreated on Friday by 1.2% and 1.1%, respectively.
  • Gold and silver fell steeply.
  • Copper, Lithium, Critical Materials, and Uranium are also experiencing a sell-off.
  • President Trump hinted at another major strike on Iran, with his Sunday “The Clock is Ticking” post on Truth Social.
  • Brent futures jumped to above $111 per barrel early Monday.

Investors are dumping long-term government bonds. The 30-year Treasury yield broke resistance at 5.0%, rising to 5.13% on Friday before easing slightly to 5.12% early Monday.

30-Year Treasury Yield

High bond yields, above the rate of inflation, increase the risk of a solvency crisis where the borrower can’t meet its interest payments. Issuing new debt to cover interest payments accelerates debt growth, causing debt-to-GDP to spiral out of control.

UK Gilts 30-year yield jumped to 5.85%.

30-Year UK Gilts Yield

The French 30-year climbed to 4.67%.

30-Year UK Gilts Yield

Italian 30-year yields are at 4.75%.

30-Year UK Gilts Yield

France and Italy have higher debt-to-GDP ratios than the UK. The primary reason they enjoy lower yields is that their long-term yields are suppressed. The Bank of England, on the other hand, is shrinking its balance sheet to restore fiscal stability.

The yield on the 30-year German Bund is even lower because of Germany’s strong fiscal position, with much lower debt levels.

30-Year German Bund Yield

The Japanese 30-year yield is shooting upwards. JGB yields should be much higher because of Japan’s precarious debt-to-GDP ratio. However, the Bank of Japan buys government bonds (JGBs) to suppress the yield and avoid a solvency crisis.

Adding to the selloff on Monday was news that Japan’s government will likely issue fresh debt as part of funding for a planned extra budget to cushion the economic blow from the war, worsening already strained government finances. Yields on ​the 30-year Japanese government bond (JGB) jumped more than 10 bps to their highest on record at 4.200% while the 10-year yield touched its highest since October 1996 ​at 2.800%. (Reuters)

The yield on the 30-year JGB has since weakened slightly to 4.10%.

30-Year JGB Yield

The chart below, by Robin Brooks, compares long-term government bond yields (on the left axis) to countries’ debt-to-GDP ratios (on the bottom axis). Yields in Japan (JP), Greece (GR), and Italy (IT) are being suppressed, while yields in Australia (AU), New Zealand (NZ), and the UK (GB) are higher due to more conservative central bank policies.

JGB Yield & Debt-to-GDP Ratio

Why are Long-term Yields Rising?

There are several overlapping reasons why long-term yields are rising:

Increased defense spending expands government deficits and raises debt-to-GDP ratios, increasing the risk of fiscal dominance.

Fiscal dominance is where the central bank prioritizes bond market stability over currency stability, lowering interest rates while tolerating higher inflation, to prevent a solvency crisis in the bond market.

The US-Iran conflict has caused oil shortages, driving crude oil prices higher. High oil prices are fueling a steep rise in inflation, increasing the risk of capital erosion for bond investors.

The US Fed has entered into a $100 billion currency swap agreement with the United Arab Emirates. The facility will help the UAE to survive the loss of oil revenues while the Strait of Hormuz is closed. Further currency swaps with other Gulf States will likely follow. The currency swaps are effectively a medium-term loan from the Fed, but risk becoming a standing facility if the conflict in the Gulf is not quickly resolved. Their primary purpose is to avoid the Gulf States selling reserves to make up for lost oil revenue. The sell-off of hundreds of billions of US Treasuries would flood the market and drive up yields.

The AI boom has driven a massive surge in capital spending by mega-cap technology companies as they vie for market share in a rapidly expanding market. Much of the capital spending is funded through long-term debt issuance, leading to a steep increase in the supply of high-quality long-term debt.

US-Iran Conflict

President Donald Trump on Sunday again threatened Iran:

“For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them,” Trump said in a Truth Social post. “TIME IS OF THE ESSENCE!” (CNBC)

Trump’s post caused a sharp jump in Brent crude futures prices when the market opened on Monday.
Brent Crude Futures (ICE July'26)

Stocks & Financial Markets

The S&P 500 retreated below 7500, falling 1.2% on Friday.

S&P 500

The Dow similarly retreated below 50,000, falling 1.1%. A decline below support at 49,000 would signal a correction.

Dow Jones Industrial Average

Bitcoin1 retreated below support at 80,000, warning of further market risk aversion.

Bitcoin (BTC)

10-year Treasury yields jumped to 4.6%. The breakout above 4.5% offers a short-term target of 4.75%. Rising Trend Index troughs indicate strong upward pressure on long-term yields.

10-Year Treasury Yield

Dollar & Gold

A Dollar shortage is driving up the US Dollar Index as global markets struggle with crude oil shortages and rising prices, a fiscal crisis among Gulf States that have lost their primary source of revenue, and lower US trade deficits.

Dollar Index

The Dollar enjoyed similar strong demand after Russia invaded Ukraine in February 2022, followed by a steep fall in November, when energy markets had stabilized.

Dollar Index

Gold is testing support at 4500. A breach of 4400 would signal a test of 4000, but respect of support remains more likely.

Spot Gold

In 2022, Gold initially shot up after Russia’s 24 February invasion of Ukraine, but then declined for 6 months until energy markets stabilized and the Dollar weakened.

Spot Gold

Silver fell steeply last week and is headed for a test of support at 71.

Spot Silver

Energy

Brent crude continues its uptrend, and another test of resistance at $120 per barrel is likely.

Brent Crude

The Dow Jones Global Oil & Gas Index respected support at 580, headed for a test of resistance at 620. Trend Index troughs above zero signal buying pressure.

Dow Jones Global Oil & Gas Index

Uranium

Uranium is taking a beating, with the Sprott Uranium Miners ETF2 (URNM) breaking secondary support at 64. A breach of support at 58 would signal a primary downtrend.

Sprott Uranium Miners ETF (URNM)

Lithium

All strategic materials are under pressure, even Lithium, which has enjoyed strong demand from booming EV sales. Sprott Lithium Miners ETF2 (LITP) broke its new support level at 16.50. Follow through below 15 would signal a correction.

Sprott Lithium Miners ETF (LITP)

Critical Minerals

Critical materials show similar selling pressure, with Sprott Critical Materials ETF2 (SETM) testing support at 35.50, while a lower Trend Index peak warns of selling pressure.

Sprott Critical Materials ETF (SETM)

Copper

Copper retreated below 14,000 after a strong run-up.

Copper

Sprott Copper Miners ETF2 (COPP) reflects similar selling pressure, breaking initial support at 42, while a lower Trend Index peak signals selling pressure.

Sprott Copper Miners ETF (COPP)

Conclusion

We expect a similar playbook to 2022, after Russia’s full-scale invasion of Ukraine: rising energy prices, followed by rising long-term bond prices, and a stronger Dollar.

S&P 500

The S&P 500 suffered a 26% drawdown in 2022, and stock prices will likely weaken, though partly cushioned by the AI boom. We also expect weakness in Gold, Silver, and strategic materials like Uranium, Lithium, Critical Minerals, and Copper — until energy markets stabilize.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
  2. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.
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Xi Has Trump Over a Barrel

Key Points

  • Producer prices jumped by 6.0% over the 12 months to April, warning of higher consumer prices ahead.
  • 10-year Treasury yields responded with a rise to 4.48%.
  • Xi Jinping has the upper hand in negotiations with Donald Trump because of China’s large strategic oil reserves, which they could use to keep prices in check.
  • The S&P 500 reached a new high at 7444, while the Dow is consolidating in a bullish narrow range below 50,000.
  • The Main Street US economy is under the pump, but Semiconductors, Construction, and Heavy Electrical industries are booming due to datacenter spending.
  • Lithium, Copper, and Critical Materials show signs of buying pressure, but Uranium is lagging.

Producer prices jumped by 6.0% for the 12 months to April 2026, driven by rising fuel prices and transportation costs. The cost of rising fuel prices is spreading through the economy, with the core index (excluding food and energy) leaping to 5.2%. The chart below shows the impact of energy shortages on producer prices after Russia’s full-scale invasion of Ukraine in 2022. We expect the impact of the Strait of Hormuz closure to be more severe.

Producer Price Index (PPI)

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Silver and Lithium Shine

Key Points

  • Silver broke through resistance at $80 per ounce, signaling a fresh advance.
  • Gold remains rangebound.
  • Oil & Gas stocks are weak, while crack spreads are widening.
  • Copper, Uranium, and Critical Materials show signs of buying pressure, following the Lithium breakout.
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S&P 500 Rallies on Job Gains, But Peace Deal Hopes Crash

Key Points

  • President Trump rejects Iran’s peace proposal.
  • Iran continued attacks on its Gulf neighbors.
  • Brent crude July futures jump to $104.50 per barrel.
  • Confidential intelligence sources say that Iran can survive a US blockade for at least 3-4 months.
  • The US labor market added 115,000 jobs in April 2026, while unemployment held steady at 4.3%.
  • The S&P 500 reached a new high, while the Dow Jones Industrial Average threatens a breakout.

DUBAI/WASHINGTON, May 10 (Reuters) – President Donald Trump on Sunday rejected Iran’s response to a US proposal for peace talks, dashing hopes for an imminent end to the 10-week-old conflict….

“I don’t like it — TOTALLY UNACCEPTABLE,” Trump wrote on Truth Social, without giving further detail. Oil prices rose $3 a barrel after the United States and Iran failed to reach agreement.

Iran’s proposal includes a demand for compensation for war damages and an ​emphasis on Iranian sovereignty over the strait, state media said. It also calls on the US to end its naval blockade, guarantee no further attacks, lift sanctions and end a US ban on Iranian oil ​sales, the semi-official Tasnim news agency said.

Brent Crude July’26 (Nymex) futures jumped to $104.50 per barrel while December’26 futures (orange) rallied to $89.25 per barrel. December prices reflect the oil market’s longer-term assessment of crude shortages. Damage to existing production and shipping facilities will take time to repair, even if the Strait of Hormuz is reopened.

Brent Crude Nymex Futures (July'26 & Dec'26)

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Trump Talks “Peace Deal” But Nothing Stops This Train

Key Points

  • President Trump again baits financial markets with the prospect of a peace agreement.
  • Brent Crude (July’26 futures) is testing support at $100 per barrel.
  • However, the crude market faces critical shortages even if a peace deal is signed.
  • The S&P 500 rallied to a new high at 7365, while the Dow threatens a breakout above 50,000.
  • The ISM Services PMI warns that growth is slowing, while soaring prices signal inflationary pressures.
  • Lithium is in a strong uptrend, while Copper, Critical Materials, and Uranium show signs of a recovery.
  • The RBA hiked rates this week and would like to hold for a while, but rising prices may force further hikes.

ISLAMABAD/WASHINGTON/TEL AVIV, May 7 (Reuters) – U.S. President Donald Trump predicted a swift end to the ​war with Iran as Tehran considered a U.S. peace proposal that sources said would formally end the conflict while leaving unresolved key U.S. demands that Iran suspend ‌its nuclear program and reopen the Strait of Hormuz.

An Iranian foreign ministry spokesperson cited by Iran’s ISNA news agency said Tehran would convey its response, while Iranian lawmaker Ebrahim Rezaei, a spokesperson for parliament’s powerful foreign policy and national security committee, described the proposal as “more of an American wish-list than a reality.”

“They want to make a deal. We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make ​a deal,” Trump told reporters in the Oval Office on Wednesday, saying later “it’ll be over quickly.”

Trump has repeatedly played up the prospect of an agreement to end the war ​that started on February 28, so far without success. The two sides remain at odds over a variety of difficult issues, such as Iran’s nuclear ⁠ambitions and its control of the Strait of Hormuz, which before the war handled one-fifth of the world’s oil and gas supply.

A Pakistani source and another source briefed on the mediation ​said an agreement was close on a one-page memorandum that would formally end the conflict. That would kick off discussions to unblock shipping through the strait, lift U.S. sanctions on Iran and set ​curbs on Iran’s nuclear program, the sources said.

A separate senior Pakistani official involved in the talks told Reuters on Thursday that negotiators were hopeful of reaching a deal but noted gaps between the sides remained.

Brent Crude (July futures), buoyed by optimism over a prospective peace deal, is retracing to test support at $100 per barrel.

Brent Crude Futures (ICE July'26)

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First Wave of Gulf War Hits CPI

Key Points

  • CPI jumped by almost 0.9% in March, fueled by a steep rise in crude oil prices.
  • A 21.2% jump in gasoline prices accounted for nearly three quarters of the monthly ​CPI increase.
  • We expect further waves as rising costs reach agriculture, mining, and transportation before filtering through to the broader economy.
  • The S&P 500 stalled at 6800.
  • University of Michigan consumer sentiment plunged to its lowest level since the late 1970s.

The first wave of price hikes hit CPI in March, with the index jumping 0.865%, fueled by a steep rise in crude oil prices driven by the war in the Persian Gulf.
CPI & Core CPI - Monthly

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Jobs Rise but Prices Soar, Growth Slows and Liquidity Tightens

Key Points

  • Non-farm employment jumped by 178,000 in March, well above the expected 60,000.
  • The unemployment rate declined to 4.3%.
  • Growth in aggregate hours worked, however, slowed to 0.4% over the past year.
  • The ISM Manufacturing Prices index jumped to 78.3%, warning of a price shock.
  • Aluminium prices soared to nearly $3,600/tonne due to supply shortages caused by the war in the Persian Gulf.
  • Brent crude closed the week at $109 per barrel, with no end to the Iran war in sight.

The BLS reported a 178,000 increase in non-farm payroll in March, well above the 60,000 forecast. Employment growth has been erratic, averaging less than 15,000 over the past 6 months.

Employment Growth

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The real risk of a Fed rate cut

Key Points

  • ADP National Employment Report estimates that the private sector shed 32,000 jobs in November.
  • Traders are pricing in an 89% chance of a 25-basis-point rate cut by the Fed on December 10.
  • ISM Manufacturing and Services PMI shows inflation is not yet under control.
  • A rate cut will likely weaken the Dollar, increase demand for real assets, and drive up long-term yields.

The ADP National Employment report estimates that the economy lost 32,000 jobs in November, the 3-month moving average turning negative for the first time since the height of the pandemic in August 2020.

ADP Private Sector Jobs

Losses are heavily weighted toward small firms, which have taken a hit from tariffs, shedding 120,000 jobs in November, while mid-sized firms added 51,000 jobs and large firms 39,000.

ADP Private Sector Jobs

The Fed is expected to announce a 25-basis-point rate cut on December 10 in response to weak jobs data. Markets are pricing in an 89% probability of a cut, with the discount rate on 13-week T-Bills falling below the Fed’s current 3.75% to 4.00% target range for the fed funds rate.

3-Month T-Bill Discount Rate

Other parts of the economy remain resilient, with the ISM Services PMI increasing to 52.6% for November, well above the 48.6% breakeven level typical of past contractions.

ISM Services PMI

New orders also signal expansion, but the rate slowed to 52.9%.

ISM Services New Orders

Employment has improved over the past four months, but remains in a contraction.

ISM Services Employment

Most importantly, from the Fed’s perspective, 65.4% of enterprises reported increased prices, down from 70% in October but still reflecting strong inflationary pressures.

ISM Services Prices

The Manufacturing sector reported similar price rises in November, though the rate of increase is slowing.

ISM Manufacturing Prices

Financial Markets

The Chicago Fed National Financial Conditions Index edged higher to -0.522 for the week ending November 21.

Chicago Fed National Financial Conditions Index

Dynamic indicators, however, like Bitcoin below, continue to warn of a sharp contraction in financial market liquidity.

Bitcoin (BTC)

The secure overnight financing rate (SOFR) jumped to 4.12%, above the 4.0% rate the Fed charges on its standing repo facility (SRF), signaling that the Fed is struggling to control pricing in the $12 trillion repo market. Repo lending is primarily secured by US Treasury Bills and Notes, and a spike in the SOFR repo rate would trigger a sharp sell-off in the Treasury market.

Secured Overnight Financing Rate (SOFR) & Interest on Reserve Balance (IORB)

Rising long-term yields in Japan and Europe are sucking liquidity out of US financial markets. The Bank of Japan (BOJ) is also expected to hike its policy rate on December 18, with the 3-month Japanese Government Bill discount rate jumping to 0.633%, well above the current 0.50% policy rate.

Japanese Govt 3-Month Bill Discount Rate

A BOJ rate hike would likely trigger a sell-off in US financial markets as hedge funds unwind large carry trades funded in Japanese Yen.

The US Dollar Index broke support at 99 and is expected to fall sharply in December, taking a double hit from a Fed rate cut and a BOJ rate hike, which would narrow the current spread by an estimated 50 basis points.

Dollar Index

Treasury Markets

Long-term Treasury yields are softening in anticipation of a Fed rate cut, but could face a sell-off amid tightening liquidity.

10-Year Treasury Yield

Stocks

The S&P 500  also rallied in anticipation of a Fed rate cut, but again, the rally risks being undone by contracting liquidity.

S&P 500

Mag 7 technology stocks continue to show gains over the past 6 months, apart from Meta Platforms (META), with Alphabet (GOOGL) building an advantage in the competition to lead AI.

Magnificent 7 Technology Stocks

Small caps are also strengthening, with the Russell 2000 ETF (IWM) testing resistance at 250.

Russell 2000 Small Cap ETF (IWM)

Gold & Silver

Gold is retracing to test support at $4,200, with high prices taming investor enthusiasm for the present.

Spot Gold

Silver is consolidating in a narrow band above support at $58 per ounce. Respect of support would confirm our target of $62.

Spot Silver

Energy Metals

Energy metals are another prospective inflation hedge for investors.

The Sprott Uranium Miners ETF (URNM) broke resistance at 56, joining copper and lithium miners in an uptrend.

Sprott Uranium Miners ETF (URNM)

The Sprott Copper Miners ETF (COPP) broke resistance at 31.50, confirming a fresh advance.

Sprott Copper Miners ETF (COPP)

Sprott Lithium Miners ETF (LITP) is also in an uptrend since breaking resistance at 11.

Sprott Lithium Miners ETF (LITP)

Conclusion

Forced to choose between its two mandates, the Fed seems willing to prioritize maintaining full employment ahead of stable prices. Cutting rates while the unemployment rate is low (below 5.0%) may please President Trump, who wants to run the economy hot, but risks a sharp rebound in inflation.

High inflation would lower the debt-to-GDP ratio but would likely increase outflows from US Treasury markets and raise long-term interest rates as international bond investors demand a higher risk premium. It would also later necessitate a sharp increase in interest rates to get the genie back in the lamp.

Falling Bitcoin prices and rising secure overnight funding rates in the $12 billion repo market signal tight liquidity in financial markets. Unwinding carry trades may destabilize financial markets if the Bank of Japan hikes its policy rate on December 18 as expected. A Fed rate cut and a BOJ rate hike would narrow the current carry trade spread by an estimated 50 basis points, risking a sharp sell-off in several trillion dollars of US assets financed in Yen.

The danger is that the Fed may reintroduce QE to stabilize the repo market, as it did during the last Powell pivot in September 2019.

Demand for gold, silver, and energy metals — copper, lithium, and uranium — is likely to increase as concerns over inflation grow.

Acknowledgments

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Uranium bear signal

The Sprott Physical Uranium Trust (SRUUF) broke support at 18.00, signaling a bear market for uranium.

Sprott Physical Uranium Trust (SRUUF)

Producers all show signs of selling pressure: Cameco (CCJ.us) in Canada, Kazatomprom (KAP.uk) in Kazakhstan, Boss (BOE.ax) in Australia and Paladin (PDN.ax) in Africa (Namibia & Malawi) and Australia.

Uranium Producers

Conclusion

We remain long-term bulls on uranium, with demand expected to grow as the industry expands at a faster rate than supply. But the short- to medium-term looks decidedly bearish.

Notes

There seems to be some confusion about sodium-cooled reactors and we have expanded our note to clarify:

The Natrium fast reactor uses sodium (the metal) as a coolant instead of water used in common light-water reactors. Sodium eliminates the danger of a high-pressure build up of steam in the containment vessel and/or separation of hydrogen from steam at extremely high temperatures, in the event of a melt-down, which could cause an explosion.

Heat generated by the sodium-cooled fast reactor is transferred through a heat exchange and stored as molten salts until required for power generation. This has several advantages:

  1. Sodium melts at 371K (98°C) and boils at 1156K (883°C), a difference of 785K (785°C) between solid and gas states, compared to just 100K for water (between ice and steam) at normal atmospheric pressure. The boiling point of sodium is much higher than the reactor’s operating temperature, requiring a far thinner reactor vessel as it is not pressurized.
  2. Sodium does not corrode steel reactor parts, instead it protects metals from corrosion. Molten salts, on the other hand, cause corrosion problems at high temperatures.
  3. The reactor in shutdown mode can be passively cooled. Air ducts are engineered so that decay heat after shutdown is removed by natural convection, with no pumping required.
  4. The reactor is self-controlling. If the temperature of the core increases, the core expands slightly, allowing more neutrons to escape the core and slow the reaction.
  5. Sodium does have a downside: it reacts with air and water and can cause fires. So it is far safer to store the heat as non-flammable molten salts, away from the reactor core.
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