Copper Stocks Are Up 60% This Year and the Squeeze Still Won't Break
MARKET OVERVIEW: Cross-asset vol stays calm (VIX 15, HY OAS 315bp, the financial stress index -1.93) and the house regime classifier reads risk-on into next week's vote by a 78% weighted vote. Michigan consumer sentiment missed for a second straight read (46.3 vs. 47.6 expected, 48.1 prior) against that otherwise quiet tape.
TL;DR — the read in bullets
- Michigan's preliminary consumer sentiment read came in at 46.3, below both the 47.6 expected and the 48.1 prior, a second consecutive print below both the forecast and the previous ...
- Funding is unremarkable: SOFR-EFFR sits at -1bp, and the Treasury General Account stands at $886bn, up $68bn over the past four weeks, a Treasury cash rebuild that pulls reserves out of...
- EUR/USD COT positioning shows a net short of 84,775 contracts, in the 1.3th percentile of the past three years, meaning the short is more stretched now than in all but the most extreme 1.3% ...
- Henry Hub gas rose 1.64% on the day and 6.10% on the week to $3.22. Products moved the opposite way: gasoline fell 4.90% on the day and 4.80% on the week to $3.1534, while heating oil fell ...
- Copper's own stock tape says the squeeze is easing; its own spread says it isn't. The $119 a tonne between those two readings is now a question for the physical market to answer, not a ...
Go deeper in the weeklies: Physical Metals Weekly · Funding and Liquidity Weekly · Rates Decomposition Weekly
The Copper Spread Is Not Listening to the Copper Stock Number
Copper closed up 2.65% on the day and 3.08% on the week, at $6,692 a tonne, with the Copper Miners ETF up 4.29% on the day against a flat-to-down 0.19% week. The cash-to-3-month spread remains in backwardation by $119 a tonne, a condition that has now held in 16 of the past 20 sessions. LME warehouse stocks, meanwhile, are up 60% year-to-date.
Those two numbers are not supposed to sit together for long. A 60% stock build is normally the mechanism that relieves a tight front-month market: more metal sitting in reporting warehouses should loosen the nearby spread toward contango, not leave it backwardated for 16 of 20 sessions running. That it hasn't happened yet is the fact worth sitting with, not the day's 2.65% print.
Metal sitting in a load-out queue, or already earmarked against a specific delivery, counts toward the 60% headline build without doing anything to loosen the nearby spread. A premium that has held in 16 of the past 20 sessions, persistent enough that spreads of this length are typically read as metal availability at the front of the curve rather than a run of stray settlement days, is the detail the stock number by itself does not explain.
What would have to be true for each reading to be the right one: if a meaningful share of this year's 60% build is queued or earmarked rather than freely deliverable, the spread can stay backwardated even as the headline stock count keeps rising, because the metal available today never gets the relief that headline number implies. If instead most of the build is freely deliverable, the $119 premium has little reason to persist, because deliverable tonnage is exactly what closes a backwardation. The stock tape and the spread cannot both keep telling opposite stories indefinitely; one of the two numbers is about to start moving toward the other.
MACRO
Michigan's preliminary consumer sentiment read came in at 46.3, below both the 47.6 expected and the 48.1 prior, a second consecutive print below both the forecast and the previous reading. That softness sits against an otherwise calm cross-asset backdrop: the house regime classifier reads pre-vote risk-on by a 78% weighted vote, built on VIX at 15 (its own calm threshold), a 2s10s spread of +0.44 (normal), a financial stress index of -1.93 (benign), and high-yield OAS at 315bp (tight). The house's composite macro stress score sits at 3.4, labeled Low.
The next high-impact print on the calendar is Existing Home Sales on October 13, expected at 3.97 million against a 3.98 million prior, essentially flat.
The gap between a soft household survey and a calm cross-asset tape is the only macro tension in the facts, and it is a gap worth tracking against next week's vote rather than reading as a trend from one print.
The rest of today's commentary
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