The 10-Year Hit a 24-Year High. Nobody Is Buying Puts. Are You Watching the Wrong Market?

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In this episode of Last Call, Andy Constan explains what's driving the sharp rise in long-term interest rates and why he's becoming more constructive on bonds. Brent Kochuba reveals why investors are betting on falling yields and not protecting against the stock market decline. And Eric Pachman breaks down the diesel supply squeeze and why its inflation impact may still be ahead of us. We have included this episode on the Excess Returns feed, but you can subscribe to Last Call on all major podcast platforms using the links in this episode description. Thank you for listening. We hope you enjoy the show.

Andy Constan (1:27)

If you can point to hawkishness coming from the committee, which ultimately resulted in a hike, you can point to Besant making a really terrible, arrogant decision to sort of dare the bond market to go higher, which it proceeded to do in terms of yields.

Brent Kochuba (1:49)

People are not positioning for downside and equities at all. Instead, they are all kind of piling into trades that are going to make money if the yields start to come off.

Eric Pachman (1:58)

I think that if we understood the physics and functioning of a refinery, we would not be so complacent right now.

Matt Zeigler (2:16)

You're watching Excess Returns. I'm Matt Zeigler. That's Jack Forehand.

We made it through another month. We didn't die. Bonds tried to kill us, diesel tried to kill us, but we persevere. How are you going, Jack?

Jack Forehand (2:30)

Just how the private jets don't take diesel, Matt.

I don't know what is happening with jet fuel because that could be up as well. I'm not sure of that, but at least they don't take diesel.

Matt Zeigler (2:38)

Is our private jet solar? How do we fly?

Jack Forehand (2:40)

Yeah, maybe eventually we'll be.

SPEAKER_9 (2:43)

I'm such an out of touch.

Jack Forehand (2:45)

I'm not sure if we're making up the runway right now with solar, but maybe someday that will happen to us. Maybe more sun up there. I don't even know. There you go.

Matt Zeigler (2:52)

Let's fly a kite. Let's fly a kite. Why can't we do this? We've got a bunch of great people with us. We've got our segments. We are looking back on the month that was, looking forward to the month ahead of us.

It's not short-term thinking. There's a long-term perspective in all these things. You want to walk us through some of the exciting people we talked to?

Jack Forehand (3:09)

Yeah, we've got Andy Constan.

The rising rate is going to be the theme of this because we'll get some data in a little bit. But if you think about what we're looking at the last month, what was the big story? It has to be how fast rates rose. We want to talk to Andy Constan about why they're rising and what it means for the future. We've got our macro segment with Andy Constan. We've got Brent Kochuba on what's going on behind the scenes and options, and that was very interesting because that was not what I expected to be going on behind the scenes and options in terms of how rates are impacting what people are betting on behind the scenes. Then we've got Eric Pachman with some great behind the scenes data that you don't see in a lot of places in terms of what he's seeing with diesel, with crack spreads, how it impacts inflation. We've got a lot of stuff to get through.

Matt Zeigler (3:47)

Start me in the rear view, let's go right there, let's jump into rates.