Credit markets are continuing the trend of the last couple of days with this afternoon seeing their underperformance accelerating. Major underperformance this week in investment grade and high yield credit markets relative to stocks (and as we noted this morning, we are also seeing financial credit in Europe notably underperforming) as Maiden Lane II assets are sold and high yield issuance peaks (and liquidity dries up). Adding to the concerns, VIX futures saw their biggest 2-day jump in over two months despite equity's modest rally. On a day when Pisani tells us there was much to rejoice about, stocks managed only negligible gains (even with broad risk assets in risk-on mode, TSY yields up, FX carry up, Oil up) and while stocks are limping higher now (aside from AAPL of course) with financials underperforming, perhaps this week of notably higher average trade size in equity futures is the calm before the real storm gets going - as credit and vol seems to be hinting at.
High yield credit (light red) has now been leaking dramatically for a few days. Investment grade credit (dark red) also started to crack this afternoon as ES (the e-mini S&P futures contract) in blue managed to creep up to new highs once again. HYG (green) has a major stumble in the middle of the day (red oval) but was 'rescued' to close higher - though ended with a stumble.
Perhaps it is coincidence but the event that stumbled credit and then equity markets initially last summer was the attempted and failed sale of Maiden Lane II assets. We note that Goldman lifted out some of that trash this week from the FRBNY and held it on their books - suggesting they got it 'cheap' if you know what we mean. Maybe hedgers are out looking for protection as they worry new marks are in place for those CDOs?
VIX futures saw their biggest 2-day jump in two months and nearly the biggest since the Thanksgiving Day rally began in earnest. By the close VIX futures had jumped 5% or over 1 vol over the last two days.
High yield credit (light red) has now been leaking dramatically for a few days. Investment grade credit (dark red) also started to crack this afternoon as ES (the e-mini S&P futures contract) in blue managed to creep up to new highs once again. HYG (green) has a major stumble in the middle of the day (red oval) but was 'rescued' to close higher - though ended with a stumble.
Perhaps it is coincidence but the event that stumbled credit and then equity markets initially last summer was the attempted and failed sale of Maiden Lane II assets. We note that Goldman lifted out some of that trash this week from the FRBNY and held it on their books - suggesting they got it 'cheap' if you know what we mean. Maybe hedgers are out looking for protection as they worry new marks are in place for those CDOs?
VIX futures saw their biggest 2-day jump in two months and nearly the biggest since the Thanksgiving Day rally began in earnest. By the close VIX futures had jumped 5% or over 1 vol over the last two days.
No comments:
Post a Comment