Quant Quake Goes Global Amid Momo Meltdown, Bond Bloodbath

Momo traders be like…

[youtube https://www.youtube.com/watch?v=oI_7kYuZhF8]

The ‘Quant Quake’ has spread across the world…

The global quant reshuffle continues… Catchup moves in Asia and continuation in Europe/US. c/o Morgan Stanley pic.twitter.com/fEu9nycXvn

— Michael Krause (@michaelbkrause) September 10, 2019

https://platform.twitter.com/widgets.js

And showed no signs of stopping in today’s trading session…

Source: Bloomberg

In fact the momentum factor has now crashed into the red for the year (after being up over 13% last week)…

Source: Bloomberg

It seems like the momentum factor reached a serious level of resistance once again…

Source: Bloomberg

This is now the biggest collapse in the momentum factor since the dot-com era and the financial crisis quant crash…

Source: Bloomberg

How long before this weighs more directly in the broad index?

Source: Bloomberg

And as momo collapses, Treasury yields are soaring as CTAs are forced to dump bonds…

Source: Bloomberg

And may mean that bonds have a long way to fall before this is over…

Source: Bloomberg

The impact of this factor unwind has sent cyclicals higher and defensives lower as Bob Pisani exclaimed “I think this is a good thing.” Except it appears ol’ Bob doesn’t see the driver of this shift as problematic at all…

Source: Bloomberg

On the day, Trannies and Small Caps surged (see short-squeeze below) as Nasdaq tumbled, only to be panic-bid back near unchanged on the day.

NOTE – stocks melted up in the last few minutes as bond yields really spiked into the close.

Most-Shorted Stocks have soared this week too…(NOTE – this is the biggest 5-day short-squeeze since the start of the year)

Source: Bloomberg

Energy stocks were best today, despite oil prices plunging…

Source: Bloomberg

Bank stocks continue to outperform the broad market (as the beneficiaries of the factor unwind) and track the yioeld curve steeper…

Source: Bloomberg

It’s been a bond bloodbath the last 5 days…with the entire curve shifting higher by 22-25bps (and really getting hammered into the close today…

Source: Bloomberg

10Y Yields are up 5 days in a row – up a stunning 24bps – the biggest jump since Trump’s election in Nov 2016…

Source: Bloomberg

30Y Yields are at a key resistance level…hitting 2.20% today

Source: Bloomberg

The late-day carnage in bonds was focused more on the short-en, sparking a bear flattener…

Source: Bloomberg

Are rates set to soar even further given the positive surprise macro data?

Source: Bloomberg

WeWork bonds crashed today, erasing the post-IPO filing gains and falling back below par…

Source: Bloomberg

The Dollar trod water for the 2nd day in a row (hovering around the lows of Trump’s tariff tantrum)…

Source: Bloomberg

Cryptos continued to slide lower today…

Source: Bloomberg

 

Silver was best, managing to end unchanged as oil and gold underperformed…

Source: Bloomberg

Gold continues to trade in sync with global negative yield aggregate volume…

Source: Bloomberg

 

Meanwhile, the firing of neocon NSA John Bolton took war premium out of crude very suddenly (and tumbled into NYMEX close)…

 

Source: Bloomberg

 

Finally, while policy uncertainty has hit record highs, equity market uncertainty remains delusionally low…

Source: Bloomberg

But the yield knows better what is to come…

Source: Bloomberg