Margin call
March 29, 2021
–Now it’s fallout from Archegos as Credit Suisse and Nomura warn of losses related to Friday’s fire sale position liquidation. As Kevin Spacey playing Sam said in the flick Margin Call, “Forty percent done by ten fifteen, by eleven o’clock all your trades have to be gone, because by lunchtime, word’s going to be out and by two o’clock you’re going to be selling at sixty-five cents on the dollar if you’re lucky. Then the Feds are going to be in here, up your ass, trying to slow you down.” Well, they didn’t quite achieve 65 cents on the dollar on the late stuff.
–ESM has given back a portion of Friday’s late ramp-up (now down 22). Fixed income barely reacting. On Friday, the ten year inflation breakeven (ten year yield vs inflation-indexed note yield) edged to a new high of 235.7 bps. Summers in a tv appearance Friday: “The idea that it [inflation] can’t rachet up quickly is just plain wrong.”
–While 2/10 spread is 6 bps off the recent high of 158, (as of Friday close), red/gold eurodollar pack spread is only 4 off the high of 177.125. Back end of dollar curve remains well offered, with golds closing -6 on Friday. The gold pack (avg EDM’25, U’25, Z’25 and H’26) settled 9788 or 2.12%.
