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Market Commentary: Week of March 30, 2020

market-commentary-week-of-march-30-bodyWhat Happened

We could have sworn that somewhere in the distance we could hear George Jetson screaming, “Jane, stop this crazy thing!” The week began with the Fed re-launching Quantitative Easing 4 (the initial launch the prior Sunday night- $500 billion treasury notes, $200 Agency MBS didn’t cut it), promising to buy unlimited amounts of treasuries, a near unlimited amount Agency MBS (the Fed bought $50 billion of MBS every day last week!), as well as new programs to buy high-grade corporate and municipal debt as well as high-grade corporate bond Exchange Traded Funds (ETFs).This time the Fed meant business, taking their balance sheet up to $5 trillion for the first time ever. Essentially, the Fed looked at the dysfunction of the most liquid markets, (Treasuries, Agency MBS, and corporate commercial paper), the complete meltdown of markets that are usually liquid, (short-term, high-grade corporate and high -grade municipal debt) and the shelter-in-place state of ever other market and decided to either backstop or buy everything. Then on Tuesday, the federal government’s $2.2 Trillion stimulus/relief package passed the Senate and risk markets rallied hard. It should be noted that despite equity indices increasing approximately 10% for the week, the VIX Index stayed firmly above 60. The general rule of thumb is when the VIX is over 30, the market is scared. The most interesting thing about the stimulus package is that very big parts of it rely on very close coordination between the Fed and Treasury. Meanwhile, outside of the Fed and Treasury things were pretty awful. With death rates spiking in Europe and the US closed for business while awaiting our turn with COVID-19. Weekly Jobless Claims came in Thursday at approximately 3.3 million.

  • The S&P 500 was up 10.3% for the week. The average daily move for the week was 4.6%

  • The NASDAQ was up 9.1% for the week. The average daily move for the week was 3.6%.

  • The 2-year Treasury dropped 7 basis points, closing at .245% Friday, the lowest yield since 2013

  • The 10-year Treasury dropped 17 basis points, closing at .68% Friday, the lowest closing since the record low-yield of .54% three weeks ago

  • The VIX Index decreased slightly, closing at 65.54 Friday. The VIX spent the entire week above 60

  • The MOVE Index decreased 34%, closing at 88 Friday as Fed QE Infinity was unleashed

  • 5-year Investment Grade Corporates (as measured by Markit CDX) tightened 26 basis points, closing at 112 basis points Friday. High-Yield corporate debt (as measured by Markit CDX) tightened 226 basis points, closing at 623 basis points after setting a new all-time high since Markit began recording in 2011 the previous Friday.

  • US Dollar Index increased 4.3%, closing at 98.37 on Friday

  • WTI Crude was down 4.6%%, closing at 21.51 on Friday. This was the lowest closing level since 1999

What’s going to happen?

The Fed was able to bring a semblance of order to the risk markets last week and with the promise to buy unlimited amounts of Treasuries, rate volatility came off from very high levels. So what’s next? In the good news department we don’t see much. The effects of our economy coming to a halt a couple of weeks ago are showing themselves in furloughs, wage reductions and layoffs. The fiscal package that was signed into law by President Trump at the end of the week is going to take time to implement and unfortunately time is something many businesses and people just don’t have. Credit downgrades are coming at a furious clip for corporates, which will force liquidation within funds that cannot hold, or have a limit to how much they can hold of bonds below investment grade. Forced selling is also coming from leveraged entities like commercial real estate REITs struggle to meet margin calls. Meanwhile, oil continues to sink toward 1998 levels increasing the pain in our energy sector. The main data release this week is the BLS March payroll report 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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