Stocks ripped higher
February 5, 2020
–Stocks soared and yields rose yesterday, but implied vol in rates was hammered. Ten year yield was up 8.4 bps to 1.603%. On the euro$ strip reds through golds down 8 to 9 bps. The curve steepened slightly as twos only fell 6.4 bps; 2/10 spread up 2 bps to just under 19. 2/5 closed just above zero after having been inverted. TYH atm straddle in April went from 1’53 to 1’44 (131 line). EDU0 fell 7.5 bps on the day to 9852, the 9850 straddle went from 30 to 27. Most ED straddle lost 2-2.5 bps.
–Stock futures continue to press new highs as an unconfirmed report of a promising drug to treat coronavirus circulated in the Chinese press. Perhaps the State of the Union speech outlining the administrations’ achievements is a contributing factor. TSLA had an incredible surge, with some comparing the move to the famous VW squeeze ( @ECantoni) see chart below.
–ADP and Service ISM today.
–The Fed’s semi-annual report to Congress is scheduled to be released on Friday. I did not see anything on the calendar about Powell speaking, so I called the Fed. They said it’s actually up to the Congressional committees to invite the Chair, and they have not yet put it on the calendars. Maybe the calendar was on the last page of the papers Pelosi was shuffling around last night. I suppose Quarles’ speech Thursday evening on the state of the economy will take on added importance.
