As we discussed in part one of our Q1-2 2023 Economic Outlook, the financial sector appears well-positioned for an economic downturn. That being said, we are seeing the deterioration in delinquencies ...
Capital Markets
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4 min read
Last Week
Treasury auctioned off three-year, 10-year, and 30-year notes for a grand total of $126 billion in new issuance. The highlight was the stupendous showing of the 10-year note on Wednesday. The new note stopped through pre-auction yield three basis points, while all the measures of auction performance were very solid. It is interesting to note, earlier in the day, July CPI posted a 5.4% year-over-year increase. Go figure.
Meanwhile, stocks ground mostly higher as the S&P 500 and the Dow Jones Industrials both closed at record levels Friday. The NASDAQ 100 underperformed slightly. The pandemic story continues to be grim and is getting grimmer, but risk assets do not seem to mind. Even in the face of another global slowdown, industrial commodities were firm.
- The S&P 500 advanced 0.71% closing Friday yet again, at a new all-time high. The average daily move was 0.18%.
- The NASDAQ was nearly unchanged. The average daily move for the week was 0.24%.
- The two-year Treasury yield was unchanged for the week, closing 0.21% on Friday. Year-to-date high yield 0.27%, low yield 0.10%.
- The 10-year Treasury yield fell two basis points for the week, closing at 1.28% Friday. Year-to-date high yield 1.74%, low yield 0.91%.
- The VIX Index dropped 4% for the week, closing at 15.45 Friday. Year-to-date high 37.21, low 15.07.
- The MOVE fell 11% for the week, closing at 55.45 on Friday. Year to date high 75.66, low 42.53.
- Five-year Investment Grade Corporates (as measured by Markit CDX) tightened one basis point for the week closing at 48 basis points Friday. High spread year-to-date 58.07 and low of 46.88.
- High Yield corporate debt (as measured by Markit CDX) narrowed two basis points for the week, closing at 284 basis points on Friday. High spread year-to-date 319, low 269.
- U.S. Dollar Index fell 0.2% for the week, closing at 92.52 on Friday. High reading year-to-date 93.297, low 89.44.
- WTI Crude was unchanged for the week using the October WTI Futures contract, closing at 68.21 Friday. High price for the front contract year-to-date 75.25, low 47.62.
- Gold, as measured by the December 2021 futures contract, rose 0.8% for the week, closing at 1,778 on Friday. High price for the front contract year-to-date 1,954, low 1,678.
- Bitcoin increased 11% for the week, closing at 47,609 Friday. High price year-to-date 63,410, low 29,865.
The Week Ahead
Coming in this morning, we have treasuries flat and equities off a fair amount, with Europe leading the way down. Liquidity is a bit wanting in both markets (as it usually is in August). The rapidly worsening situation in Afghanistan has shocked much of the world, but market reaction, as expected, is pretty muted. We have a relatively quiet data week with Retail Sales tomorrow and July FOMC minutes on Wednesday.
Definitions:
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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