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Single-Digit VIX Today?

Tyler Durden's picture




 

She came, she spoke, and she sent stocks to a new all time high. That is perhaps the simplest summary of what Janet Yellen did yesterday when, as a result of her droning monotone, she managed to put the VIX literally to sleep, which closed at the lowest since 2007 and the resulting surge in the S&P was a fresh record high, because despite the "concerns" Fed member have about record high complacency, all they are doing is adding to it. And now that apparently the Fed has a market "valuation" department, and Yellen can issue fairness opinions on whether the S&P is overvalued, the only question is whether today, as a follow through to yesterday's "buy everything, preferably on leverage, sincerely - the Fed" ramp, the VIX will drop to single digits today.

The post-FOMC market reaction suggested that there was a good proportion who had expected the Fed to be more hawkish. This will likely encourage the search for yield and the low volatility environment to continue for a while yet. Going into the FOMC, UST yields were hovering around 2.63%, but they finished the day at 2.58% (almost 7bp lower on the day). The UST curve bull flattened, perhaps helped by a lowering of the Fed’s longer term rate projection to 3.75% from 4% previously. The CDX IG index was basically unchanged just before the FOMC statement but rallied tighter to close at - 3.5bp on the day - a pretty big move. The S&P500 (+0.77%) returned to record highs after notching its best gain in a month. EM bond markets which were still open during the time (mostly LATAM) saw yields tighten by around 2-3bp.

The market reaction in Asia is largely following the same theme with risk on led by EMFX, credit and Japanese equities. On the currency side, the US dollar has continued its slide today with IDR (+0.55%), INR (+0.75%) and MYR (+0.45%) being the main beneficiaries. Amongst equity indices, the key laggard today is the HSCEI (-0.2%) which is reacting to comments by Chinese Premier Li that China will avoid a hard landing and will therefore limit the scale of any economic stimulus. On a YTD basis, one of the key regional laggards, the Nikkei (+1.5% today) is within a couple of percentage points of being in positive territory for the year. It’s been a remarkable 10% rally from the May lows for the index, helped by headlines around pension fund reform and tax cuts.

Stocks traded higher since the get-go in Europe (Eurostoxx 50, +1.14%), with materials sector outperforming on the back of higher commodity prices, which itself were largely a product of a weaker USD. In terms of notable equity movers, EDF shares traded sharply lower in Europe, trading at its lowest level in 4-months, after the French energy minister Royal blocked a planned tariff hike in August. On the other hand, Rolls Royce shares surged 5% after the company announced GBP 1bln buyback. The Italian and Spanish markets are the best-performing larger bourses, Swiss the worst.

The euro is stronger against the dollar. French 10yr bond yields fall; German yields decline. Commodities gain, with nickel, natural gas underperforming and wheat outperforming. U.S. jobless claims, Philadelphia Fed index, leading index due later.

Market Wrap

  • S&P 500 futures up 0% to 1949.3
  • Stoxx 600 up 0.7% to 348.6
  • US 10Yr yield down 1bps to 2.57%
  • German 10Yr yield down 5bps to 1.33%
  • MSCI Asia Pacific up 1.3% to 145.5
  • Gold spot up 0.3% to $1281.5/oz

Bulletin headline summary from RanSquawk and Bloomberg

Treasury yields from 2Y to 10Y drop overnight, with 5Y leading, after Yellen repeated that the Fed is likely to make further QE reductions in “measured steps”
and that it expects interest rates to stay low after the buying ends.

Treasury five-year notes extended yesterday’s gain, the biggest in 11 weeks, and government bonds from Australia to Spain rose as investors gauged the Federal Reserve’s policy stance will keep global yields low

U.K. retail sales fell for the first time in four months in May as a World Cup boost failed to offset a slump in demand at food stores

Municipal bonds are on pace to outperform Treasuries in total return for an unprecedented 10th straight month and are also beating investment-grade company debt

U.S. prosecutors are broadening their investigation of the foreign-exchange industry as they question salespeople at the world’s biggest banks on their practices, according to two people with knowledge of the matter

The U.S. is distancing itself from Iraqi Prime Minister Nouri al-Maliki, pressing for political change that could help blunt a Sunni insurgency

Sovereign yields lower. EU peripheral spreads mixed with Greece 10Y ~6bps lower. Asian equities mixed; European equity markets, U.S. stock futures higher. WTI  crude, copper, gold higher.

US Event Calendar

  • 8:30am: Initial Jobless Claims, June 14, est. 313k (prior 317k)
    • Continuing Claims, June 7, est. 2.6m (prior 2.614m)
  • 9:45am: Bloomberg Economic Expectations, June (prior 42.5)
    • Bloomberg Consumer Comfort, June 15 (prior 35.5)
  • 10:00am: Philadelphia Fed Business Outlook, June., est. 14 (prior 15.4)
  • 10:00am: Leading Index, May, est. 0.6% (prior 0.4%) Supply
  • 11:00am POMO: Fed to purchase $2.25b-$2.75b in 2021-2024 sector

EUROPE

  • All 19 Stoxx 600 sectors rise
  • 84.2% of Stoxx 600 members gain, 14.7% decline
  • Eurostoxx 50 +1.1%, FTSE 100 +0.8%, CAC 40 +0.9%, DAX +0.8%, IBEX +0.9%, FTSEMIB +1%, SMI +0.3%

ASIA

  • Asian stocks rise with the Nikkei outperforming and the Shanghai Composite underperforming.
  • MSCI Asia Pacific up 1.3% to 145.5
  • Nikkei 225 up 1.6%, Hang Seng down 0.1%, Kospi up 0.1%, Shanghai Composite down 1.5%, ASX up 1.6%, Sensex down 0.2%
  • 10 out of 10 sectors rise with materials, industrials outperforming and energy, tech underperforming

FIXED INCOME

Bund and Gilts traded higher, in tandem with stocks in Europe this morning as risk on sentiment dominated the price action in reaction to somewhat dovish FOMC decision yesterday where the Fed failed to deliver any hawkish surprises and lowered their long run view of the Fed Funds Rate. There was little in terms of tier 1 macroeconomic releases, but the ONS said that retail sales for the month of May were supported by sales of replica football shirts, while lower fuel prices driver overall prices lower.

EQUITIES

Stocks traded higher since the get-go in Europe (Eurostoxx 50, +1.14%), with materials sector outperforming on the back of higher commodity prices, which itself were largely a product of a weaker USD. In terms of notable equity movers, EDF shares traded sharply lower in Europe, trading at its lowest level in 4-months, after the French energy minister Royal blocked a planned tariff hike in August. On the other hand, Rolls Royce shares surged 5% after the company announced GBP 1bln buyback.

FX

EUR/USD and GBP/USD traded higher in Europe this morning, with GBP/USD touching on its highest level since August 2009, inspired by USD weakness as the USD index moved lower the key 200DMA line which follows dovish FOMC decision yesterday. At the same time, AUD benefited from an uptick in commodity prices, with the pair advancing close to 2014 highs.

COMMODITIES

Gold and silver prices benefited from a weaker USD inspired by dovish FOMC yesterday, with silver prices approaching key USD 20 level, which is also the 100DMA line and is the highest level since mid-May.

* * *

DB's Jim Reid concludes the overnight recap

With the Fed and Fed Chair delivering very little in terms of surprises, the post-FOMC market reaction suggested to us that there was a good proportion who had expected the Fed to be more hawkish. This will likely encourage the search for yield and the low volatility environment to continue for a while yet. Going into the FOMC, UST yields were hovering around 2.63%, but they finished the day at 2.58% (almost 7bp lower on the day). The UST curve bull flattened, perhaps helped by a lowering of the Fed’s longer term rate projection to 3.75% from 4% previously. The CDX IG index was basically unchanged just before the FOMC statement but rallied tighter to close at - 3.5bp on the day - a pretty big move. The S&P500 (+0.77%) returned to record highs after notching its best gain in a month. EM bond markets which were still open during the time (mostly LATAM) saw yields tighten by around 2-3bp.

The market reaction in Asia is largely following the same theme with risk on led by EMFX, credit and Japanese equities. On the currency side, the US dollar has continued its slide today with IDR (+0.55%), INR (+0.75%) and MYR (+0.45%) being the main beneficiaries. Amongst equity indices, the key laggard today is the HSCEI (-0.2%) which is reacting to comments by Chinese Premier Li that China will avoid a hard landing and will therefore limit the scale of any economic stimulus. On a YTD basis, one of the key regional laggards, the Nikkei (+1.5% today) is within a couple of percentage points of being in positive territory for the year. It’s been a remarkable 10% rally from the May lows for the index, helped by headlines around pension fund reform and tax cuts.

Taking a look at other developments, ISIS militants and the Iraqi government battled for control of the Baiji refinery which is Iraq’s largest, sending crude up 0.7% yesterday and another 0.2% today. The WSJ said that the White House is signalling that it wants a change in government in Iraq without Maliki as its head, given the PM has been unable to reconcile differences with the Sunni minority. President Obama has also reportedly told Congressional leaders that he is considering military options to respond to the Iraq conflict and that he will not be seeking further congressional approval for those actions (BBG).

Elsewhere, the FT reports that US share buybacks and dividend payments reached a new record in Q1 2014, paying a total of $241bn to shareholders in the three months to March. This is $8bn more than the previous record set in Q3 2007 according to the FT who cite S&P Dow Jones data. In the first quarter, 290 companies in the S&P 500 reduced their share count year over year – up from 276 in the previous quarter, and share buybacks in the year to March 2014 are up 29% yoy. In another sign of the strength of funding markets, Cyprus returned to the international bond market just a little over a year since it announced a bail-in on bank deposits. Cyprus priced EUR750m of 5yr notes at a yield of 4.75%.

Looking at the day ahead, the focus turns to the data with UK retail sales this morning, followed by the Philly Fed and US jobless claims. The Philly Fed index is expected to slip to 14.0 (vs 15.4 in May). On the corporate side, Oracle reports earning today.

 

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Thu, 06/19/2014 - 07:08 | 4872793 Moe Howard
Moe Howard's picture

Fuckin' A!

Thu, 06/19/2014 - 07:13 | 4872798 GetZeeGold
GetZeeGold's picture

 

 

Get-r-done!

Thu, 06/19/2014 - 07:16 | 4872805 Headbanger
Headbanger's picture

To negative VIX and BEYOND!!

 

But wait!  There's MOAR!

A free BONUS CHART just for you while supplies last!  Hurry, don't miss it!

http://www.marketwatch.com/investing/Index/VIX/charts

Thu, 06/19/2014 - 07:34 | 4872837 Haus-Targaryen
Thu, 06/19/2014 - 07:44 | 4872860 Headbanger
Headbanger's picture

Love that video!

Thank God for rednecks!

https://www.youtube.com/watch?v=uE-wJXM1V_4

Thu, 06/19/2014 - 07:52 | 4872871 Haus-Targaryen
Haus-Targaryen's picture

I need to watch that movie again.  

Thu, 06/19/2014 - 07:43 | 4872859 negative rates
negative rates's picture

It can't go any lower than 6.66, it's written.

Thu, 06/19/2014 - 08:02 | 4872886 stocktivity
stocktivity's picture

It's all Bullshit!!!

Thu, 06/19/2014 - 08:12 | 4872921 HardAssets
HardAssets's picture

America is owned by criminals and the vast majority of her citizens are naive apathetic morons, ignorant of anything of importance.

They allow the enslavement of themselves, their children, and grand children.

What a complete fraud.

Thu, 06/19/2014 - 11:11 | 4873754 graneros
graneros's picture

You nailed it with precision.  Our own citizens ARE the biggest threat to what is left of this nation.  I am simply astounded by the absolute stupidity, callousness, and complete lack of common sense of the overwhelming majority of the people I meet and of my acquaintances. I include most of my own family members in this group of morons. They do not have the slightest clue of why things are the way they are.  You can show them and tell them and they look at you as if you just grew an extra head.

 

 

Thu, 06/19/2014 - 18:36 | 4875578 MeelionDollerBogus
MeelionDollerBogus's picture

buuuuuut
duckface
drunk makeup on youtube
DANCING WITH THE STARS!!
why doo peeple wurry bout da eeconomies?

Thu, 06/19/2014 - 18:31 | 4875559 MeelionDollerBogus
MeelionDollerBogus's picture

The Electrolytes Reserve Board - the integrity MUTILATOR!

It's what sheep crave!

Thu, 06/19/2014 - 07:08 | 4872795 0z
0z's picture

Miss Priced is the One and only God!

Thu, 06/19/2014 - 07:50 | 4872868 negative rates
negative rates's picture

Who?

Thu, 06/19/2014 - 07:12 | 4872802 i_call_you_my_base
i_call_you_my_base's picture

If Yellen spoke every day the DOW would be at 50,000.

Thu, 06/19/2014 - 07:16 | 4872804 firstdivision
firstdivision's picture

What day is the 13F release?

As I've been saying for a long, long time now, I'd really love to have an audit of what the "other assets" were on the FRB balance sheet. The beauty is how they dumped that shit, and I suspect it was to a Belgian buyer, all at the end of '12.

Thu, 06/19/2014 - 07:19 | 4872807 intric8
intric8's picture

There can NOT be THIS insignificant a level of fear in the markets. What a crock of shit. It obviously implies manipulation. Never thought i'd see central planners succumb to such an outrageous level of involvement.

Thu, 06/19/2014 - 07:24 | 4872823 Dr. Engali
Dr. Engali's picture

"I abandoned free market principles in order to save the free market."

George W. Bush

Thu, 06/19/2014 - 07:31 | 4872836 GetZeeGold
GetZeeGold's picture

 

 

He probably thought the next President would undo that.

Thu, 06/19/2014 - 07:38 | 4872851 firstdivision
firstdivision's picture

I'm pretty sure he knew the next President would contiune to allow the blatent manipulation, just as he allowed it through his entire term.  Other wise the 'next President' would have never been elected.  If you think GWB and BHO are not cut from the same silk, well then I've got a bridge to sell you and some great land in Florida.

Thu, 06/19/2014 - 07:42 | 4872856 NoDebt
NoDebt's picture

How much you asking for the bridge?

(I need the yield)

Thu, 06/19/2014 - 07:53 | 4872862 Dr. Engali
Dr. Engali's picture

Is it a Jersey bridge? I hear the tolls are extra high depending on which political party wants to cross it. There's some good yield for you. Whatever you do don't by a 100 million dollar bridge to nowhere in Alaska..... No ROI there.

Thu, 06/19/2014 - 12:20 | 4874039 mkhs
mkhs's picture

Silk.  Hahaha.

Thu, 06/19/2014 - 07:19 | 4872813 RealityCheque
RealityCheque's picture

Complacency: the monster that will eat everything in its path.

Thu, 06/19/2014 - 07:18 | 4872814 valley chick
valley chick's picture

What could possibly go wrong?  

Thu, 06/19/2014 - 07:19 | 4872815 youngman
youngman's picture

I think Central Banks are now 50% of the market...with the politicians backing...because if they can show Joe the plumber that his 401K is at an all time high..he will feel good..its just a way to calm the masses...on the other side if gold and silver were at all time highs ...that would scare people..so they cant have that

Thu, 06/19/2014 - 07:26 | 4872826 GetZeeGold
GetZeeGold's picture

 

 

It's OK.....I converted 100% to MyRa's.....I'm OUT!

 

Whew....that was damn close.

Thu, 06/19/2014 - 07:53 | 4872873 negative rates
negative rates's picture

Yea, I mean who wants be lead to slaughter after being told the truth.

Thu, 06/19/2014 - 07:25 | 4872816 Dr. Engali
Dr. Engali's picture

Minting 'money' like this just by BTFD shouldn't be so freaking easy, but it is. Eventually there will be hell to pay for this, but might as well grab the gimme while they are passing it out. Take your profits and buy real assets.

Thu, 06/19/2014 - 07:27 | 4872829 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Well, the CBs can buy all them stocks but at some point they will have them all. Then there will be no sellers left.

Thu, 06/19/2014 - 07:50 | 4872866 GetZeeGold
GetZeeGold's picture

 

 

They could just go short and bail-in every 401K in land....and they could do it legally.

 

i hope "they" didn't hear me just say that.

Thu, 06/19/2014 - 07:35 | 4872846 GFORCE
GFORCE's picture

Just send it to zero. It's now just another manipulated indicator.

Thu, 06/19/2014 - 07:42 | 4872858 toadold
toadold's picture

Chief Sitting Bear and the tribal council are expected to announce their solution to the wampum shortage next Moon.  

War chief Farting Eagle states that White man's wampum is flooding the zone and actually devaluing wampum. Shortage is percived because it takes more wampum to buy horses and squaws.  

Thu, 06/19/2014 - 07:47 | 4872863 NoDebt
NoDebt's picture

..... and the drought is really hurting the production of maize (you call it corn), kemosabe.

There.  Every Indian word (excuse me, Native American word) we ever learned on TV when we were kids in 2 posts.

Thu, 06/19/2014 - 08:16 | 4872931 Market Rage
Market Rage's picture

It was a well played short squeeze.  Now what?  I think it all comes off.

Thu, 06/19/2014 - 08:24 | 4872951 master bait
master bait's picture

TVIX is got to be the biggest fraud, vix does not make the market but follow the market along with all the other phoney circus charts and graphs.

People that brought the vix etn and etf's to market are the ones who made out by selling shorts from the begining, letting the share price drop to where the items are then reverse split reducing total outstanding shares that they are responsible to cover pocketing all the $$$ in their gruby pockets..

Thu, 06/19/2014 - 08:40 | 4873013 The worst trader
The worst trader's picture

I loveiti when a plan comes together!

Thu, 06/19/2014 - 08:45 | 4873041 curbyourrisk
curbyourrisk's picture

It is time for a 10:1 reverse stock split of the VIX.  Just think how high we can make this market go if we can hammer the VIX everyday.

 

This fucking economy is ridiculous and the FED is a complete waste of fresh air.  Shut it down and imprison the crominals.  EVERY LAST ONE.

Thu, 06/19/2014 - 09:00 | 4873102 Moe Howard
Moe Howard's picture

Hang 'em High. The only solution.

Thu, 06/19/2014 - 09:34 | 4873246 SmilinJoeFizzion
SmilinJoeFizzion's picture

Im not sure what  the dumbass trade of the day is- to go long TVIX or XIV

Thu, 06/19/2014 - 09:53 | 4873346 tommylicious
tommylicious's picture

bah...buy 'em!

 

Thu, 06/19/2014 - 10:03 | 4873380 t0mmyBerg
t0mmyBerg's picture

To me her voice sounds not monotone but like the voice of someone who has had a stroke, or maybe just someone who is slightly retarded.  I predict that as a result solely of her voice, that at one of the upcoming meetings, people will lose confidence in her and the whole mental vortex of bullishness which has been spinning detached from any steering winds will be subsumed back into the jetstream of shit going on in the world and the market will have a spasm that "no one could have seen that coming"

or maybe that is just wishful thinking as I am long about 20 VIX contracts at the CBOE.  Been buying vol out to September down to 14.5.  14.5 with 3 months to go!!!  13.5 on the August contracts with 2 months left to go!!!  Unreal

Thu, 06/19/2014 - 15:56 | 4875042 MeelionDollerBogus
MeelionDollerBogus's picture

3.00/share for hvu, 217.05= HVU1/11 x SPY, $3.31/share is the trend price when 219 is the output of that equation which is the long-term 18 month trend.
I'd say under-valued & worth a buy, just a small amount, given a 10% rise could happen with no net change to SPY / SP500 / Dow / DIA.

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