Historic day
March 10, 2020
–SPX fell 7.8% yesterday with Nasdaq -7.3%. SPX hit the 61.8% retrace from the 2018 low to this year’s high. Nasdaq did not quite touch the 50% retrace. At the low SPX was close to a 20% pullback from the high of the year. Everything, including crude oil, has had a nice bounce overnight as the admin looks to unleash stimulus. With CLJ0 having plunged to 27.34 yesterday morning, it’s now 32.80.
–Near atm euro$ straddles came in hard. For example EDU0 9950 straddle settled 31 on Friday, but yesterday EDU0 9962^ settled 22.5. However, blue Sept (3EU) atm straddle was unchanged at 47.5, having been the 9925 strike Friday and the 9937.5 strike yesterday. Yields plummeted to new historic lows yesterday morning with tens hitting 31 bps and 30’s at 70 bps. Closes (at futures settlement) were significantly off the lows, with tens 49.5 bps, down 21 from Friday, and 30’s 93.8, down 26.5 from Friday. The convexity grab was relentless with 5/30 down 13 to 51 bps, though it may have run its course for now. Supply coming in the form of new tens and thirties tomorrow and Wednesday. Nominal treasury straddle levels have more than doubled from last Thursday to yesterday.
–Peak on the ED curve is EDH21 with a settle of 9960.5 or 39.5 bps. peak on the FF curve is FFQ0 at 9989.5 or 10.5 bps. The Fed has increased the size of repos. I was looking this morning for discount window borrowings but couldn’t find the data. In any event, it seems like the Fed can now wait for the FOMC meeting to pull the trigger on another 50.
–In another sign of stress gold/silver ratio matched the record high of 1991 at 99.50. Makes silver look a bit cheap and indeed as of this writing silver is up a bit and gold is lower as stocks bounce. As a point of reference, the ratio is now 3 times higher than the plunge low in 2011.
