Monday morning consolidation
Feb 24, 2025
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–On Friday SPX -1.7% and Nasdaq Comp -2.2%. Led to flight-to-quality buying in treasuries and SOFR. Ten-year yield fell 8.2 bps to 4.416% and on the SOFR strip H6, M6, U6 (the first three reds) were the strongest, all +10.5 (9614.5, 9616.5, 9617.5) with U6 being the peak price contract. SFRU5 atm straddle, the 9593.25^, was 37.25 on Thursday, but on Friday the atm 9600^ settled 41.5. (9600^ on Thursday was 40.0s). From TO this morning (PNT options), “In case you missed, on Friday afternoon SOFR call skew and implied vol exploded for it biggest 1 day move in 6 months. No major news – stocks were lower – there was WILD panic not seen for a while and it caught people off guard.”
–I had expected follow-thru this early morning, but everything has had a small bounce (ESH a bit higher, treasuries lower).
–Important X-post (thanks JVL)
https://x.com/cynicalpublius/status/1893154644789977292?s=46
Here is a quote from Trump’s Exec Order: (citing the post above)
” Economic security is national security. The PRC does not allow United States companies to take over their critical infrastructure, and the United States should not allow the PRC to take over United States critical infrastructure. PRC-affiliated investors are targeting the crown jewels of United States technology, food supplies, farmland, minerals, natural resources, ports, and shipping terminals.”
–BABA has nearly doubled since January, 80 to 143. (Partly capital repatriation?) Financial nationalization may mean that overseas investments aren’t as safe as they used to be. The rapidity of the SVB bank run caught the Fed off guard. Imagine it on a global scale.
