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HedgeTalk: Risk Versus Speculation

Minneapolis, MN | September 14, 2023 | HedgeTalk Newsletter | By: John Trefethen, Director & Co-Founder


Table of Contents:

  1. Market Moving Headlines

  2. Interest Rates

  3. Currencies

  4. Commodities

  5. Concept of the Week: Risk versus Speculation

  6. Quote of the Week

 

Market Moving Headlines

  • Oil prices rise to a 10-month high on supply tightness.

  • Nickel falls after lithium discovery in the US

  • 10-year Treasury yield approaches a 15-year high.

  • The annual inflation rate increases above forecasts to 3.7% in August.

  • Mortgage applications in the US continue to fall.

  • Eurozone industrial output falls more than forecast.

  • Hong Kong manufacturing output growth slows in Q2.

  • UK GDP shrinks more than expected in July.

  • Sterling at over 3-month low on weak GDP data.

  • UK imports hit 17-month low.

Interest Rates

US Treasury Market Chart grey, white and green chart














Interest Rates chart














Green, black, and grey 2Y - 10Y - Past 12 Months Spread graph











Currencies

Currencies grey, white and green chart














Commodities

Commodities grey, white, green chart














Concept of the Week: Risk Versus Speculation


There are many types of derivatives that are used for taking on risk – that speculate on the movement of interest rates, currency exchange rates, and commodity prices. When hedging, one is not guessing the direction that interest rates, currency exchange rates, and commodity prices will move. Instead, they are mitigating the risk of loss should any of those items move in a direction that negatively impacts the organization. Not hedging a risk is speculation. If an entity decides to not hedge an exposure, that entity is in effect speculating that rates, currencies, or commodities will not move in a direction that will adversely impact their institution.


hedging versus speculation green, white, and black chart

Quote of the Week


“If you’re going to panic, panic early.” – Nassim Taleb

 

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Author: John Trefethen, Director and Co-Founder

Mobile: 612-868-6013

Office: 952-746-6040


HedgeStar Media Contact:

Megan Roth, Marketing Manager

Office: 952-746-6056


 

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