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With Futures Limit-Down, ETFs Suggest Bloodbath In Stocks, Credit Is Even Worse

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With Futures Limit-Down, ETFs Suggest Bloodbath In Stocks, Credit Is Even Worse

In the words of CNBC, US equity futures have been stable (limit down at 5%) for hours. That joke of a comment is entirely crushed by the fact that ETFs suggest the fall is dramatically worse.

SPY (the largest and most liquid S&P ETF) is down over 7% in pre-market…

VIX futures are topping 52…

And HYG – the HY Corporate Bond ETF – is crashing over 5.5% to Dec 2018 lows, signaling spreads are set to explode…

Goldman sees four main factors driving the stress in credit:

1. Credit markets were having problems before the Saudi announcement, credit down when equities traded higher

2. Significant increase in non-credit accounts looking to short the sector last week

3. Last week saw record outflow across IG, high yield and loans

4. Liquidity issue even more prevalent because of virus related contingency /  BCP planning

And they suggest that although clients are better positioned than in 2015 (when had a lot of energy issuance to fund shale revolutions); expect continued selling as oil re-prices lower and the virus spreads.

And energy bonds are utterly collapsing…SM Energy bonds -$36!!

As a reminder:

  • If the S&P 500 declines 7%, (208 points), trading will pause for 15 min

  • If declines 13%, (386 pts) trading will again pause for 15 mins

  • If falls 20%, (594 pts) the markets would close for the day.

Buckle Up!

Tyler Durden

Mon, 03/09/2020 – 08:46

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