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    Capital Markets | 5 min read

    Market Commentary: Week of March 28, 2022

    Last Week

    We had shock and awe in the bond markets last week as Fed presidents and governors took to the airwaves stating they were amenable to multiple 50 basis point hikes at the remaining meetings in 2022 and beyond. It seems it was only yesterday that folks chuckled at St. Louis Fed President James Bullard when he called for one 50 basis point hike in 2022.

    Wall Street economists have come around to this view, seemingly at lightning speed. Many have begun predicting a funds rate of at least 2.50% by year’s end (we are currently at 34.6 basis points), coming more or less in line with the Fed Funds Futures curve and Overnight Index Swaps (OIS), the place where people put their money down to play, not just predict.

    The Treasury Yield Curve continued to flash hard-landing warnings signs by continuing to flatten. Last week, 3s-10s joined the ranks of the inverted; that leaves only 2s-10s standing positive. Fixed income spread products such as corporate debt and Mortgage-Backed Securities took it on the chin. Commodities continued to soar as the Commodity Research Bureau (CRB) index rose to a new year-over-year high. The nickel farce on the LME continues to play out as the historic short squeeze continues to get sorted out, at least sort of, anyway.

    Stocks? They were up on the week with the NASDAQ 100 now higher than where it was pre-Ukraine invasion and pre-rate selloff. Go figure.

    • S&P 500 rose 1.8% for the week. The average daily move was .87%.
    • The NASDAQ increased 2% for the week. The average daily move for the week was a ridiculous 1.15%.
    • The 2-year Treasury yield jumped 33 basis points for the week closing at 2.27% on Friday, a new year-over-year high. For those keeping score at home, the note has increased 84 basis points since the month-end of February. High year over year 2.27%, low yield .10%.
    • The 10-year Treasury yield rose 33 basis points for the week, closing at 2.48% Friday, a new year over year high. Year-over-year high yield 2.48%, low yield .91%.
    • The VIX Index fell 13% for the week, closing at 20.81 Friday. Year-over-year high 36.45 and low 15.07.
    • The MOVE Index surged 36% for the week, closing at 125.27 on Friday. Year-over-year high 140.03 and low 42.53.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads widened 8 basis points for the week closing at 72 basis points Friday. Year-over-year high 78 and low of 46.56.
    • High Yield corporate debt (as measured by Markit CDX) widened 10 basis points, closing at 368 basis points on Friday. Year-over-year high 411, and low 269.
    • U.S. Dollar Index rose .5% for the week, closing at 98.79 on Friday. Year-over-year high 99.29 and low 89.44.
    • WTI Crude declined 10.5% for the week using the May WTI Futures contract, closing at 113.9 Friday. Year over year 123.70, and low 47.62.
    • Gold, as measured by the April 2022 futures contract rose 1.3% for the week, closing at 1,954 on Friday. High price for the front contract year over year 2,043 and low 1,678.
    • Bitcoin rose 6.8%, closing at 44,578 Friday. High price year over year 67,734 and low 29,865.

    The Week Ahead

    We come in this morning with fixed income calling the tune. Last night, the 10-year Treasury yield got to 2.55% before settling back down as we come into the U.S. trading session. I expect 10s to test 2.5% again, probably today. The curve continues to flatten as the 2-year note yield is up sharply again.

    Global equities are up a fair amount despite worsening news out of China as more industrial centers are shutting down as COVID-19 is bubbling back up. Remember COVID-19?

    This morning and then this afternoon, Treasury will be auctioning off $50 billion 2-year notes and $51 billion 5-year notes. That should be interesting. We will see if Treasury shorts use the auction to cover winning short Treasury bets, or whether the sentiment is that we continue to go higher in yield. Tomorrow, we get $47 billion 7-year notes.

    Crude is down sharply, mostly due to the previously mentioned COVID-19 event in China.

    It should be yet another very “interesting” week. Good Luck.

    Join our investment experts as they discuss Fed policy, Municipal bond market performance, and 2022 predictions.

    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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    Securities offered through SWBC Investment Services, LLC, a registered broker/dealer. Member FINRA & SIPC. Advisory services offered through SWBC Investment Company, a Registered Investment Advisor, registered as such with the US Securities & Exchange Commission. SWBC Investment Services, LLC is under separate ownership from any other named entity. SWBC Investment Services, LLC a division of SWBC, is a nationwide partnership of advisor.

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    John Tuohy

    John Tuohy is CEO of SWBC Investment Services, LLC, a Broker/Dealer and SWBC Investment Company, an SEC Registered Investment Advisor (RIA). In his role, John is responsible for identifying, developing, and executing the division's strategic plan and all business development, sales, and marketing activities.

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