From 60/40 to 0/100 and a long vacation
October 3, 2023
–New highs in treasury yields. Tens up 11 bps to 4.681% and 30s +8.6 to 4.794%. Additionally, the 10y inflation-indexed yield rose to a new high 2.334%, a level last seen in 2008. As of this writing TYZ and USZ remain pinned to yesterday’s lows, with TYZ3 107-07 (-3.5) and USZ 112-07 (-5). Dollar/yen is 149.85, awaiting intervention, while DXY is holding around 107. FFX3 settled 9460 (5.40%), down 3 on the day with heavy volume of 188k and an open interest increase of 48k. Hedging against a Nov 1 hike.
–Interesting tweet from David Dierking: Over past 6 trading days, the S&P 500 is down 1% and the utilities sector is down 11%. The last time that utilities underperformed by 10%+ while the S&P 500 was negative over a six day span? Never over the past 25 years.
–YTD SPX is up a bit over 12%. The three-month bill is around 5.5%. Has to be pretty tempting to shut down the equity portion of the portfolio, take the bill yield and glide into year-end in Q4. BofA and Morgan Stanley both made new lows for the year yesterday. Gunjan Banerji posts a tweet: BofA has a chart of rates going back to “3000 BC”. Sounds like BofA is looking around for historical anomalies that will explain correlation breakdowns of bullet-proof hedging strategies that didn’t quite work out this time. “It’s quite like the environment 970 years ago…”
–ISM Mfg yesterday a bit stronger than expected at 49.0 vs 47.9 expected. Today JOLTs forecast at 8808k vs 8827k last.
