Risk assets, led by equities, rebounded sharply last week with stocks breaking their multi-week losing streak. Have we found the bottom or was last week a dead-cat bounce? The flows seem to indicate the latter.
Treasury yields spent yet another week taking a sickening rollercoaster ride, this time ending down sharply. Meanwhile, the crisis in crypto seems to have taken a pause. A lot of very bad things have happened in the “stablecoin” realm. Stablecoins are supposed to be the “safe” currency crypto users use to transact. We have seen some of the largest like Luna go to zero as they lost their algorithmic peg to hard currency. What is an “algorithmic peg”? Let’s put it this way, you can’t explain it on the back of a napkin let alone a box of napkins. Not good.
Other stablecoins like USDC that actually have dollars in reserves to maintain their peg to the dollar may find themselves under pressure as there are questions as to whether they have indeed backed up their coins 100% with hard currency. If there is any funny business with their reserves, we could be in for yet another disaster.
- The S&P 500 rose 6.4% % for the week. The average daily move was 1.65%.
- The NASDAQ rebounded 7.5% for the week. The average daily move for the week was 1.9%.
- The 2-year Treasury yield fell 12 basis points closing at 3.06% on Friday. High year-over-year 3.43%, low yield .10%.
- The 10-year Treasury yield declined 9 basis points for the week, closing at 3.14% on Friday. Year-over-year high yield 3.47%, low yield .91%.
- The VIX Index fell 13% for the week, closing at 27.23 Friday. Year-over-year high 36.45 and low 15.07.
- The MOVE Index declined 5% for the week, closing at 127 on Friday. Year-over-year high 140.03 and low 42.53.
- 5-year Investment Grade Corporates (as measured by Markit CDX) spreads tightened 6 basis points for the week closing at 94 basis points Friday. High spread Year-over-year high 102 and low of 46.56.
- High Yield corporate debt (as measured by Markit CDX) tightened by 48 basis points, closing at 529 basis points on Friday. Year-over-year high 588, and low 269.
- US Dollar Index declined 0.5% for the week closing at 104.13 on Friday. Year-over-year high 104.85 and low 89.44.
- WTI Crude was nearly unchanged for the week using the August WTI Futures contract, closing at 107.62 Friday. Year-over-year 123.70, and low 47.62.
- Gold, as measured by the August 2022 futures contract fell .5% for the week closing at 1,830 on Friday. High price for the front contract year-over-year is 2,043 and low is 1,678.
- Bitcoin rose 2.7%, closing at 21,183 Friday, a new year-over-year low. High price year-over-year 67,734 and low 20,630.
The Week Ahead
We come in this morning with equities higher and Treasury yields higher as well. Equities surged on Friday, pulling corporate credit with it. This week before the long weekend will be a good test to see whether sentiment on risk has changed or if we are on the way down some more.
While bonds spread to Treasuries tightened last week more or less across the board, discussions with market participants indicated there is not much conviction. We get many Fed presidents and governor appearances this week and a good slug of economic data with Durable goods for May kicking things off this morning. The biggest number will most likely be PCE on Friday.
An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.
- The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield.
- The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
- The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
- The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.
- The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.
- The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September.
- The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September.
- The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.
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