CME Group resilient under yield control
The guest argued that CME Group is an attractive, high-yielding investment that is misunderstood by the market regarding its interest rate derivative risk.
The argument
While the guest initially feared that yield curve control would decimate CME's interest rate derivative volumes, historical analysis of similar policies in Japan revealed that interest rate trading actually boosts initially before a very slow decline. This resilience, combined with highly profitable commodity derivatives and a solid dividend yield, makes the stock look like a bargain after its recent pullback.
The thesis, stress-tested
✓ What validates it
- ✓Stabilization or growth in interest rate derivative volumes during periods of central bank rate caps
- ✓Increased commodity derivative trading volumes
▸ Risks discussed
- ▸Potential long-term decline in interest rate derivative volumes if yield curve control is sustained indefinitely
Hear it yourself
"Yet, of course, the futures market, the future prices of oil are down massively from the peak. One, is that supply crunch fundamentally, correct? Will we see that? And and two, is it an obvious opportunity to indeed go along the oil majors like you outlined? I think so. It's been the position I've been buying the most in the last, last week. I think it's particularly depending how you apply it as well. Like, I'm I'm taking the view like, like, one way I've been doing it lately is I'm buying Shell, really long dated options. So I'm going right out to, December 2030 because the volatility is very cheap."
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