Greetings, Equities: The S&P 500 plummeted almost 10% on Thursday, the worst one-day drop since 1987. VIX is near the 2008 highs. Credit: There was more pain in credit markets on Thursday. Here are High-yield (HY) and investment-grade (IG) CDX spreads: Rates: The spread between the 30yr mortgage rate and the 10yr …
The Daily Shot Brief – March 12th, 2020
Greetings, Credit: As we mentioned a few days ago (#5 here), the muni market looked frothy. High-yield muni bonds seemed particularly vulnerable. Well, the market finally cracked. Here is the ratio of AAA muni yields to the 10yr Treasury. Equities: The share of S&P 500 stocks trading above their 200-day moving average dipped …
The Daily Shot Brief – March 11th, 2020
Greetings, United States: Online search activity suggests that consumers are getting nervous as the number of new US coronavirus cases climbs (second chart). Eurozone: Can Italy contain the coronavirus? Unlike China, it has no ability to deploy an aggressive police state. For example, Italy’s decision to quarantine the whole country would …
The Daily Shot Brief – March 10th, 2020
Greetings, Equities: M&A activity has been surprisingly robust. Rates: The Fed decided to boost repo financing to make sure that money markets continue to function smoothly. Energy: Drilling at the largest US shale plays is unprofitable at current prices. Emerging Markets: Lebanon is defaulting. China: Airline passenger traffic remains depressed. …
The Daily Shot Brief – March 9th, 2020
Greetings, Energy: Crude prices crashed, plummetting some 30% in early trading. US crude (second chart) dipped below $30/bbl for the first time since 2016. The Brent curve moved deeper into contango (positive-sloping). Commodities: Gold continues to rally amid risk asset rout. Equities: The correlation between US stocks and crude oil has risen. …
The Daily Shot Brief – March 5th, 2020
Greetings, Administrative Update Reminder: The Daily Shot as well as The Daily Shot Brief will not be published tomorrow. United States: Non-manufacturing activity (ISM) strengthened in February, topping forecasts. Once again, all bets are off for March. The index of new orders jumped. United Kingdom: Gilt yields have been tumbling. China: The stock …
The Daily Shot Brief – March 4th, 2020
Greetings, United States: Rate futures are now pricing in an 85% chance of another 50 basis point cut at this month’s FOMC meeting (3/18). The market expects the US central bank to take the benchmark rate below 0.6% by early next year. Here is the recent history of emergency rate cuts by the …
The Daily Shot Brief – March 3rd, 2020
Greetings, United States: Supplier deliveries slowed as a result of China-related bottlenecks. Manufacturing activity indicators tend to get a boost from slowing supplier deliveries because they can be an indication of rising demand (suppliers can’t keep up). But that’s not the case this time around, suggesting that the regional Fed surveys and the …
The Daily Shot Brief – March 2nd, 2020
Greetings, Equities: Last week’s increase in VIX was one of the largest in recent history. The VIX curve backwardation was also unusually large. Here is the spread between VIX (1-month vol) and VXV (3-month vol). Commodities: Gold has decoupled from Treasuries. China: As we saw in the World Economics SMI report from a few …
The Daily Shot Brief – February 28th, 2020
Greetings, Equities: It took remarkably little time for stocks to correct 10%. The VIX futures curve: Credit: High-yield fund outflows have accelerated. Credit spreads are now much too tight relative to equity implied volatility. Here is VIX vs. investment-grade and high-yield CDX spreads. Rates: The whole TIPS curve (real rates) …
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