Credit Slumps, Equity Pumps, And Volume & Volatility Dumps

Tyler Durden's picture

UPDATE: MANU below IPO price at $13.90 now....sigh

You know the score by now. Equities stage late day surge to green driven by an irrepressible squeeze lower in short-term volatility but high-yield credit doesn't follow suit as volume remains absolutely amazingly incredibly non-existent. S&P 500 e-mini futures (ES) ended the week nicely higher - closing today at the highs over 1402 (at the day-session close) with VIX at 5 month lows well under 15% (down 0.5 vols on the day which is a big move for a 1.5pt ES gain). HYG (the high-yield bond ETF) ended lower again - basically 5 days in a row - which is very unusual given equity's push to new highs. Risk assets in general did leak higher as stocks pushed up but are notably less bullish (and it appeared from our chats that credit desks left early and the IG and HY indices were simply being reracked higher - as opposed to traded there). Gold outperformed on the day - and it seemed like the EOD ramp in ES was a magnetic pull to Gold - as it disconnected from Treasuries and FX quite handily. The USD ends the week up 0.29% (yes, up), the S&P 500 up 1% while Treasuries limped a little higher in yield today to end the week 5-10bps higher (and steeper) in yield and commodities up the same as stocks (around 1%) aside from oil which managed 2.2% on the week.

NYSE Volume....dead

S&P 500 e-mini futures saw the lowest volume in years this week (as low as xmas-weeks) with the week's range the lowest in 16 months...It does make us wonder if Knight was using ES as its market overlay to manage its market-making exposure as 'nothing' changed this year in ES volumes in general until this week and suddenly now a cliff-dive!

 

VIX smashed over 22% lower in the last 7 days - this has happened twice before in the last year and did not end well for the bulls...

 

 

 

Gold outperformed but stocks tried to catch up into the close...

and credit continues to underperform...

 

Credit underperforming not just stocks (green) but notably weak relative to intrinsic value (dark red and lower pane). We suspect they are trying to soak up the selling pressure in the ETF before they are forced to unwind in the cash bond market (and we pointed out this week that HYG has little cash left)...

 

but FX markets exhibited major dispersion this week with EUR 0.9% weaker vs USD and CAD 0.9% stronger as the DXY closed up 0.3% (with the now ubiquitous US open to EU close actin dominating)...

 

Charts: Bloomberg

 

Bonus Charts: MANU Afterhours hit $13.90...