... shows that commodities inflation panic was in full-swing earlier overnight, where war-related price-shocks are trading through what Nomura's Charlie McElligott writes was "escape velocity" on likely stop-outs from "Shorts" (think commodity producers and traders who were short futures to hedge prices, similar to the margin call experienced by Peabody), and with the market seemingly realizing there is little that CB monetary policy can do to control it.

Picking up on Zoltan Pozsar's latest comments about a fractured commodity market, where "toxic" Russian commodities are no longer deemed viable collateral, potentially setting the stage for the next liquidity crisis, McElligott writes that "one doesn't need to stretch their imagination too far to see how a commodities trading house that is long underlying / short future is a rough equivalent to a Fixed-Income RV trade which as per the Mar 2020 example can see this "basis" go wrong-way FAST when there is a shock removal of liquidity (FX reserves in system sudden decline from the aggregate of the SWIFT and Bank of Russia sanctions, plus the market's unwillingness to transact abd the drawdown on corporate Credit lines) and this knock-on matters tremendously when we think about the de-leveraging risk via "Commodities as Collateral" unwind potential" (more here).