Despite a slew of strong March economic data—much stronger than expected—equity and other risk assets kept well bid. The surprise of the week was the sharp drop in treasury yields that accompanied the data.
Early in the week, Treasury auctioned three-year, 10-year, and 30-year debt. The auctions went pretty well and were over by Tuesday. Then, on Thursday in particular, the 10-year rallied over one point with yields touching 1.53%, while the 30-year rallied over two points with yields touching 2.21%. The rally was puzzling, considering the market’s uneasiness with potential inflation growth. The most likely culprit—a big return to the Treasury market by Japan and China who showed strong demand for treasuries in the first quarter. Meanwhile, domestic buyers with plenty of cash (like banks), waiting for higher yields, had their hands forced as the yields continued to grind lower, triggering strong demand.
Equities continued to march higher with the public offering of crypto darling Coinbase and blowout earnings releases from our major banks.
- The S&P 500 advanced 1.4% for the week. On Friday, the index set a new all-time high. The average daily move for the week was .45%.
- The NASDAQ rose 1.09% for the week. The average daily move for the week was .76%.
- The two-year Treasury yield increased one basis point for the week, closing at .16% on Friday.
- The 10-year Treasury yield fell eight basis points for the week, closing at 1.58% on Friday.
- The VIX Index continued its slide, dropping 3% for the week and closing at 16.25 Friday, the lowest reading since February 21, 2020.
- The MOVE Index increased 2% for the week, closing at 62.57 on Friday.
- Five-year Investment Grade Corporates (as measured by Markit CDX) tightened one basis point for the week, closing at 50 basis points on Friday.
- High-yield corporate debt (as measured by Markit CDX) tightened five basis points for the week, closing at 289 basis points on Friday.
- U.S. Dollar Index dropped 0.6% for the week, closing at 91.56 on Friday.
- WTI Crude rose 6.5% for the week, using the June WTI Futures contract, closing at 63.19 on Friday.
- Gold, as measured by the June 2021 futures contract, advanced 2% for the week, closing at 1,780 on Friday.
- Bitcoin appreciated 8.4% for the week, closing at 63,833 on Friday. On Wednesday, Bitcoin set a new all-time high.
The Week Ahead:
As we come in Monday morning, equity futures have fallen back from the highs set last Friday. Treasury yields are down slightly. As far as economic data releases, this week is light. First-quarter corporate earnings season continues. Bitcoin and Ethereum, after hitting new highs last week, sold off hard over the weekend, down approximately 11% and 10% respectively from their new all-time high set last week. After last week’s rally, we feel that Treasury yields are vulnerable to a rise as semi-forced demand dissipates.
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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