Walk-Squawk Morning Wire

Soy & Corn Ease on Weather; Meal Basis Firms as Funds Sit Record Short

BofA’s Hartnett Flashes Full Sell Signals — Market Breadth Collapsing, Bonds in the Crosshairs

Bank of America’s Michael Hartnett has officially flipped the switch: nearly all of the firm’s proprietary market indicators have now triggered sell signals, signaling caution as equity indices hit fresh record highs.

In his latest Flow Show, Hartnett points to a trifecta of red flags:

• FMS Cash Rule: Cash as a percentage of assets under management (AUM) in the Fund Manager Survey has dropped to 3.9% historically a bearish signal. Past instances show an average 2% SPX decline after this level is breached.

• Global Breadth Rule: Just 64% of MSCI ACWI equity indices are trading above their 50/200-day moving averages well below the 88% sell threshold.

• Flow Trading Rule: Over the past four weeks, global equity and high-yield bond inflows equaled 0.9% of AUM, another confirmed sell signal.

Despite these red flags, Hartnett emphasizes that the real bear trigger lies in bonds, not equities: “Bears target bonds, bulls target stocks,” he writes.

Bond Market: On the Edge

The strategist flags that 30-year bond yields are flirting with critical “jailbreak” levels 5.1% in the U.S., 5.6% in the U.K., and 3.2% in Japan. If yields break higher and the MOVE index (currently around 80) spikes above 100, expect a risk-off shift in global markets.

Breadth Breakdown

While headline equity indices push higher, internal market strength is weakening:

• Equal-weight SPW vs SPX sits at a 22-year low.

• Small cap Russell vs SPX is at a 25-year low.

• Value vs growth is near a 30-year low.

Hartnett sees this divergence as a clear warning sign that the U.S. economy is either slowing or inflating an equity bubble. In contrast, value and small caps are outperforming in less euphoric global markets.

Monetary Echoes of 1971

Hartnett also draws a parallel to the Nixon era. In 1971, amid economic turmoil, the White House pressured the Fed to cut rates and Fed Chair Arthur Burns obliged, fueling a boom-bust cycle. Today, with Trump vocally pushing Powell to ease, Hartnett suggests we could see a similar scenario unfold.

If Powell is removed or politically pressured into cuts, history suggests the short-term selloff could morph into a longer-term inflationary surge, echoing Nixon’s 1972 re-election setup.

The market may be celebrating now, but BofA’s top strategist sees storm clouds forming and they’re coming from the bond market first.

---

Trump vs. Powell: Markets Scramble for the Steepener Trade

Wall Street didn’t wait long to react after headlines hit suggesting President Donald Trump may move to fire Federal Reserve Chair Jerome Powell.

Within minutes, market strategists began circulating “macro hedge” alerts none more concise than Citrini Research’s James van Geelen, who recommended buying 2-year Treasuries and shorting 10-year notes.

The Trade Logic:
If Powell is ousted and replaced by a more dovish chair aligned with Trump’s rate-cut demands, short-term yields could drop fast. Meanwhile, long-end yields may rise as markets price in higher inflation risk and the loss of Fed independence a classic “steepener” scenario.

Big Money Moves:

• James van Geelen (Citrini Research): Pushed the 2s/10s steepener to 50,000 clients

• Mark Dowding (BlueBay): Flagged increased inflation and dollar risks

• Meghan Swiber (Bank of America): Highlighted the growing popularity of bearish dollar and curve steepening trades

Why It Matters:
The mere threat of Powell’s removal is reshaping bond positioning. With Trump openly pressuring the Fed to cut rates and markets already primed for policy easing traders are front-running what could be a structural shift in U.S. monetary policy.

If Powell is indeed replaced, the implications could extend well beyond the bond market, challenging assumptions about Fed independence and accelerating inflation expectations.

---

🌾 Wheat Watch: Bangladesh Inks Deal with U.S. Growers Amid Tariff Fears

Bangladesh has signed a five-year memorandum of understanding with U.S. Wheat Associates to import 700,000 metric tons of U.S. wheat annually. The deal signals a strategic shift away from Russian and Ukrainian suppliers as Dhaka seeks to ease rising trade tensions with Washington and avoid a potential 35% tariff targeting its garment exports.

This agreement marks a growing trend across Asia, with countries like Vietnam and Indonesia also increasing U.S. ag imports in recent weeks. The pact secures a reliable wheat supply for Bangladesh which typically imports around 7 million tons a year while deepening agricultural ties with the U.S.

---

🌱 Soybeans & Corn Retreat After Weather Bounce

Soybeans broke a three-day rally as favorable U.S. crop weather and continued silence from China on new purchases pressured prices. November beans dropped below $10.30 as NOAA maps showed rain for parts of the Midwest early this week.

Corn followed soybeans lower, shedding up to 0.8% after its own sharp run higher last week. Wheat held mostly steady.

• Soybeans: -0.9% to $10.26/bu

• Corn: -0.7%

• Wheat: Flat

Trade remains a headwind for soy, with no U.S. export sales yet on the books for 2025/26. Though President Trump has softened his tone on China, no concrete progress has emerged.

---

CFTC Managed Money Update as of July 16th

🌽 Corn

• Net Short: -174,755 contracts

• Takeaway: Funds remain net short, maintaining pressure despite seasonal weather risks and growing export chatter.

---

🌾 Chicago Wheat

• Net Short: -60,487 contracts

• Takeaway: Funds are still sizable shorts but have recently trimmed some exposure. Any bullish catalyst could spark a fast cover.

---

🌱 Soybeans

• Net Short: -32,278 contracts

• Takeaway: Despite some recent buying, funds remain net short. Markets are watching China demand and weather headlines.

---

🥣 Soymeal

• Net Short: -133,016 contracts (‼️ Record Short)

• Takeaway: Managed money is at a new record net short in meal, creating a powder keg setup if any supply or demand surprises hit.

  ---

🌾 Cash Grain Market Update – July 18, 2025

Corn:
Spot CIF corn basis levels were slightly weaker across the Gulf, with barge bids off 2–4 cents today. FOB premiums were steady but unenthusiastic, despite board strength. July basis at the Gulf was quoted at +99U, while August was seen near +110U. Buyers remain hesitant to chase despite stronger futures. Interior basis held mostly steady; processor bids in the Western Corn Belt were firm, with plants in IA and NE showing a slight uptick. River bids in the Upper Midwest showed signs of life as movement slows into the weekend.

Soybeans:
CIF soybean bids held steady for nearby slots but weakened slightly further forward. July basis was posted at +125Q, and August held near +135Q. While export demand chatter remains in the background, no flash sales were reported today. Processor bids remain firm in the East as crushers battle slow farmer selling. Western bids were steady to slightly weaker. Domestic meal demand continues to support crush margins, helping maintain a firm interior soy basis.

Soybean Meal:
Spot rail meal offers were mixed, firming in the Eastern Corn Belt while steady to weaker out West. Chicago was offered at +22Q, up slightly, while KS and IA showed softening bids. Domestic end-user interest is beginning to emerge on the break, but export demand remains quiet. With managed money sitting on a record short in meal, basis strength may indicate quiet underlying demand.

Wheat:
CIF SRW wheat bids were steady to firmer, with spot basis quoted at +95U, supported by slow harvest movement and quality concerns. HRW basis was unchanged, with FOB premiums holding firm as exporters report improving logistics but lack of aggressive buying interest. Interior basis levels in the Southern Plains were flat. Chicago and KC cash markets are quietly firm, especially as basis firms despite futures pullbacks.

Summary:
Grain movement remains sluggish, especially as farmers focus on fieldwork and wait for stronger basis or board pops. Export interest is tepid but steady. Processors remain active buyers in the soy complex. Watch basis trends next week, particularly in meal for signs of whether end users are quietly taking advantage of price dips while funds remain heavily short.