Stocks & Bonds Dump, Dollar Pumps As Breakevens Soar

The most notable aspect of today’s trading was the ongoing hawkish tilt being priced-in by STIRs, now expecting at least one rate-hike by July 2022…

Source: Bloomberg

TSLA was down over 20% from its highs today (back below $1000) before the sudden mysterious buying ramp occurred (exactly like we saw last week when Musk was dumping shares)…

After a solid overnight session – despite weakening China data – US equities saw wave of selling at the cash open that accelerated into the European close. Small Caps were the biggest loser on the day. A late-day panic bid lifted the S&P green on the day, but left th erest of the majors marginally red still…

And it felt like, as Tesla, so the rest of the bubble markets went today…

Treasury yields were higher across the board today with the curve notably steeper (30Y +7bps, 2Y +1bps). The selling wave hit around 0830ET and continued until the EU close for the long-end…

Source: Bloomberg

The 30Y Yield broke back above 2.00% (but remains below the Fed Taper Day highs)…

Source: Bloomberg

US Breakevens surged higher again today, to fresh record highs…

Source: Bloomberg

Additionally, the US inflation expectations are accelerating faster than other Developed Economies…

Source: Bloomberg

Interestingly, IG credit saw a huge outflow last week from one of its largest ETFs…

Source: Bloomberg

Investors withdrew a net $1.49 billion from the IShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) in a single session, the biggest one-day decrease since April 1. The outflow reduced the fund’s assets by 3.9 percent to $36.8 billion, the lowest level in at least a year, according to data compiled by Bloomberg.

Crypto pumped’n’dumped today.

Bitcoin ramped up above $66,000 overnight before slumping back and finding support at $64,000…

Source: Bloomberg

Ethereum jumped up above $4750 before fading back below $4600…

Source: Bloomberg

Gold managed gains on the day, despite the dollar’s strength, rebounding from an earlier selling wave…

Thanks to supportive weakness in real yields…

Source: Bloomberg

Oil prices staged a decent comeback today after WTI fell back below $80 once again…

US NatGas prices tested down into the red briefly before taking off and getting back above $5.00…

Finally, if this morning’s move in the S&P 500 Index holds into the close, the equity index will rack up its 22nd day with a move of less than 1% in either direction, a streak not seen in more than 22 months. The tranquility of the S&P 500 is in contrast to small caps or the Nasdaq 100 Index, which have posted at least six days with bigger moves during that time.

The equity market looks calm as the S&P 500 Index enters the third week of the month — when most equity options expire. That event has repeatedly shaken up stocks this year. While history is not always a trustworthy guide, the S&P 500 has posted a 1% move (in either direction) in six of the past eight op-ex weeks, data compiled by Bloomberg show. But, for now, as SpotGamma notes, the options market (risk-reversals) are highly complacent:

This shows the price of a slightly out-of-the-money call against an equivalent put and its recent rise suggests traders have little concern with current markets. This metric is not just a barometer of traders risk view, but does suggest that the vanna tailwind (i.e. selling implied volatility to buy S&P500) has lost its force indicating perhaps less impulsive gains from here in the short-term.