Dow Closes At Highest Since 2007 As High Yield Outperforms

Tyler Durden's picture

Retirement must be on again as the Dow creeps up to close at its highest since 12/28/2007 - no more reassuring sign that we need QE stat!! The high-yield bond ETF (HYG) also pushed to new highs - amid heavy volume - as it left its credit-spread and equity risk reality in the dust (as well as its intrinsic value) but who cares - QE/ESM/OMT/WTF - it's on like donkey kong. At least VIX kept some sense of rationality as it closed near its highs on the day, pricing in somewhat the binary concerns of the next 24-36 hours. Volume was nothing to write home about - nor was average trade size - as S&P futures rolled well off their highs to fall back below VWAP into the close and after-hours (when volume picked up). Commodities were mixed with Oil and Copper up, Gold flat and Silver down as the USD dropped (down 0.3% on the week) and stabilized after Europe's close. Treasuries leaked higher in yield (despite a record-breaking 3Y) but remain below Friday's peak-yield levels.

 

S&P futures did not enjoy the whole day - despite rallying up to yesterday's closing VWAP - though of course Green is green...

 

But The Dow closed at its highest since 2007...

 

as S&P/Russell tread water and Trannies surge...

 

but HYG (the high-yield bond ETF) had a day - which we can't help feel looks like some index arb efforts given how dislocated it is from intrinsics (lower pane)...

 

and the afternoon saw HYG on its own... (forget about call constraints and convexity - yield is yield bitches)...

 

though with rates low - it seems the pull of the technicals in the CDS market (black) for HY credit is strong for HYG...

 

though perhaps VIX showed some the way - as its short-dated hedge-ness does provide some sense of reality that there is a chance that the Holy Grail is not delivered unto us tomorrow...

 

Correlations in general improved today - but stocks (like yesterday) were leading risk-assets lower. The exuberance in HYG dislocated from SPY/TLT/VXX into the close (left chart) and the weakness in Treasuries and stability in JPY crosses this afternoon did not encourage risk-off like we saw in ES (right chart)...

 

Charts: Bloomberg