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    Capital Markets | 4 min read

    Market Commentary: Week of March 8, 2021

    Last Week:

    The selloff in treasury rates resumed in force last week with the 10-year Treasury touching 1.60% again. The main drivers were a virtual speech by Federal Reserve Chairman Powell where he showed a lack of concern over near-future corrosive inflation possibilities and the rate rise we are currently witnessing.

    Adding to the rate market’s angst, Democrats in the Senate reached a deal (with themselves, as zero Republicans signed on) on the $1.9 trillion stimulus legislation. Additionally, we had better-than-expected employment report on Friday.

    The equity markets took the rate rise poorly as the rotation out of tech—especially new “disrupter tech”—and into names that make money and have P/E ratios with less than three digits continued. Interestingly, corporate bonds and syndicated loans have so far hung in there.

    • The S&P 500 declined .8% for the week. The average daily move for the week was 1.56%

    • The NASDAQ dropped 2.1% for the week. The average daily move for the week was 2.2%.

    • The two-year Treasury yield increased one basis point for the week, closing at .14% on Friday.

    • The 10-year Treasury yield increased 17 basis point for the week, closing at 1.57% on Friday.

    • The VIX Index declined 12% for the week, closing at 24.66 on Friday.

    • The MOVE Index was dropped 8% for the week, closing at 69.37 on Friday.

    • Five-year Investment Grade Corporates (as measured by Markit CDX) was unchanged for the week, closing at 57 basis points on Friday.

    • High-yield corporate debt (as measured by Markit CDX) was also unchanged for the week, closing at 315 basis points on Friday.

    • U.S. Dollar Index increased 1.2% for the week, closing at 91.98 on Friday.

    • WTI Crude was increased 7.5% for the week, using the April WTI Futures contract, and closing at 66.09 Friday.

    • Gold, as measured by the April 2021 futures contract, dropped 1.7% for the week --closing at 1,698 on Friday.

    • Bitcoin increased 1.3% for the week, closing at 49,462 on Friday.

    The Week Ahead:

    Rates have continued to rise this morning and stock futures—especially NASDAQ 100—continue to get hit. The Treasury market will have a big test this week as Treasury auctions off $58 billion three-year notes on Tuesday; 38 billion 10-year notes on Wednesday; and $24 billion 30-year bonds on Thursday. It will be interesting to see if buying interest picks up for higher yielding 10-year and 30-year debt.

    For economic releases, we get CPI Wednesday and PPI on Friday. Now that inflation fears are front and center, this data will be interesting.

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    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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    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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