Don’t worry…. It’s “Contained”…
After some weakness last week, everything was awesome Sunday night when futures gapped higher at the open on North Korean capitulation headlines and then stocks rallied early on, but as rates started to surge up towards 3% (10Y) so stocks started to get spooked… and once they hit unchanged lost all momentum…but of course, dip-buyers were back to save stocks…
In cash markets, Trannies led and thanks to some manic buying the S&P managed to scramble to a 0.006% gain on the day!!!
There was no clear catalyst for the later day leg lower (as bond yields were rolling lower), but some noticed that the Hong Kong Dollar was surging off the weak-end of its currency peg as HKMA intervenes (selling everything to buy Hong Kong Dollars)…
S&P and Dow closed the day in the red for 2018.
VIX traded with a 15 handle briefly today…bounced but was then smashed lower to get the S&P barely green…
Big Bank stocks tanked again…
FANGMAN stocks also tumbled…
Correlations across asset classes decoupled…
Despite near-record speculative positioning short Treasuries across the curve…
Yields are rising, and rising fast with 10Y testing up to the 3.00% Maginot Line for the first time since January 2014…
But 10Y didn’t quite get there…
And by the close, 30Y yields were actually lower on the day…
Investors haven’t been this pessimistic on benchmark U.S. Treasuries since February’s sell-off in equities.
And as Bloomberg reports, fund managers who need to insulate their bond portfolios from higher yields are having to pay a stiffer premium for puts over calls now than at the start of the year.
For now, bond yields are running ahead of Jeff Gundlach’s favorite indicator (Copper/Gold)…
But amid all the panic about rising bond yields… the yield curve flattened on the day…
The Dollar was en fuego again today with the Dollar Index surging for its 5th day in a row, back above 90.00…
JPY was the biggest mover on the day, dropping 1% against the dollar… (even offshore Yuan was dumping today)…
EURUSD tumbled below 1.22 and tested its 100DMA…
The Dollar strength weighed heavily on PMs and most commodities… but WTI seemed to find a magical bid around the US cash market open…
Silver closed right at its 50DMA…
Aluminum was monkeyhammered after Washington discussed easing sanctions on Rusal…
Silver’s slump sent the Gold/Silver ratio soaring once again…
One thing of note – look at the divergence in silver and oil today above – now consider where WTI/Silver is trading…
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