Equities traded in a very narrow range (aside from an early day-session stop-run) amid extremely low volume in equity cash and futures markets and ended the day modestly lower (holding the post-Draghi gains). However, a funny thing happened on the way to the equity bull market; HY and IG credit have underperformed since mid-day Friday, VIX (+1.3vols to 18.03%) has risen notably since the open on Friday - completely shrugging off equity's strength, and while Treasuries saw a great deal of ugliness at the end of last week - and a pull back would be expected - they notably outperformed (relatively speaking) their equity cousins today. The USD gained 0.25% today as the EUR dropped a notable 0.5% but only WTI reacted to that (by dropping 0.67% today) while Copper and Gold trod water and Silver spurted to a high-beta 1.7% gain (crossing back above its 50DMA for the first time since mid-March). As Unilever and Texas Industries issue debt at record-low coupons we also note that IG/HY advance-declines lines are extremely high and along with implied-skewness in SPY options suggests a very high level of complacency.
Equity futures meandered between overnight lows and their VWAP/unchanged levels all afternoon after an early rip to flush out stops above Friday's highs...
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VIX (+1.3 vols to 18.03%), after being the sell-front-month-premium-until-someone-rips-your-arms-off risk driver of last resort recently, has disobediently diverged in a rather more worrisome way recently...A lot of this is macro hedging as implied correlation is rising (index vol rising faster than single-name vols) and we are also seeing some volatility term structure flattening but that is mainly driven by the front-end bear-flattening NOT long-end bull flattening...
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and Treasuries were sending a 'weaker' message than other asset classes today also...
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with only Silver really reacting today...
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Credit markets have lagged in the last few days and ended today weaker than Friday's close (despite a late day illiquid push up effort in HYG)...
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On a day when Unilever (5Y) and Texas Instruments (3Y) broke all-time record low coupons for corporate bond issuance, we look at cash credit markets.
Cash corporate bond markets have remained resilient in the face of some weakness recently as flows dominate but the advance-decline lines for both IG and HY credit is now at extreme buying levels suggesting some of that exuberance may be due to fade (especially when we consider just how low dealer inventory has been forced to become - which will mean far less liquidity when anyone sells - if that is ever allowed)...
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Charts: Bloomberg
Bonus Chart: The Skew that is implied in the prices of SPY options (in other words, how much do we need to shift the downside tail of a normal distribution to fit with the market's pricing - which is different from the simple skew in pricing) is back up to relatively epic complacency levels...
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Bonus Bonus Chart: Oil priced in Silver (given today's 'spurt' in Silver, we got thinking about this relationship again). Seems like since the November Central Bank interventions, Oil priced in Silver has had a rather cyclical channel to trade in and maybe today's shift was more reflective of a normalization in that relationship ahead of 'events' this week...
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