Big-Tech & Bitcoin Jump, Bonds & Bank Stocks Dump As US Default Risk Soars

Another day, another ugly macro print (durable goods orders – ex Boeing – far weaker than hoped for, and shipments slumped); more banking system anxiety (not helped by FRC threats); and even more debt-ceiling anxiety as Dems make it clear no matter what Reps offer, they won’t pass it.

FRC issued a blackmail threat to the other banks to ‘rescue them or face the wrath of the markets when we explode’ (our translation), but the market did not like and dumped the stock even more (down 35% today after yesterday’s 50% collapse). The FDIC didn’t help things by suggesting FRC’s Fed borrowings capacity could be cut (clearly in a play for force a public bailout and make the big banks – that face billions of losses from uninsured deposits given to FRC – to pay up for FRC’s loans)…

Source: Bloomberg

The KBW Bank Index tumbled back near post-SVB lows…

Source: Bloomberg

One stumbling block to a solution has been the conflicting needs of US officials and the banks that might help.

• The regulators favor a private rescue that doesn’t involve the US seizing the bank and taking a multibillion-dollar hit to the FDIC’s insurance fund.

• Banks want to avoid anything that damages their own finances and have been waiting for the government to offer aid, such as the FDIC taking control of the firm’s least desirable assets – something that can happen under the law only if First Republic fails and is put into receivership.

Not pretty but the T-Bill curve is breaking bad for a worst-case scenario X-Date…

Source: Bloomberg

And USA Sovereign risk has never been this high…

Source: Bloomberg

Nasdaq was the big winner today (thanks to MSFT and GOOGL) while Small Caps and The Dow led to the downside

VIX (normal, 1D, and 9D) all gapped down at the open – from yesterday’s spike – but that vol-selling faded around 1200ET (as puts were bid, sending vol higher)…

…as 0DTE traders piled aggressively into puts (while call plays were entirely muted (once again confirming Nomura’s Charlie McElligott’s recent note that there has been a regime-change in 0DTE from intraday-hedging/fading trends to an “accelerant risk”…

Source: SpotGamma

Value stocks crashed relative to growth today after chopping sideways relative to each other for the last three weeks…

Source: Bloomberg

This was the biggest growth/value daily shift since Nov ’22.

And ATVI was clubbed like a baby seal after UK regulators denied MSFT’s bid (MSFT rallied on the day BUT it was not moved by the ATVI decision)…

Treasuries were mixed today with the short-end lower in yield and the long-end underperforming (2Y -3bps, 30Y +4bps). Yields remain significantly lower though on the week with the short-end outperforming (curve steepening)…

Source: Bloomberg

The 2Y Yield tested up to 4.00% today but couldn’t hold it…

Source: Bloomberg

The Dollar ended the day lower but the session was a roller-coaster: down hard overnight then a sudden panic bid as US equity markets opened. The dollar index is higher on the week…

Source: Bloomberg

Crypto soared today, led by Bitcoin which touched $30,000…

Source: Bloomberg

Update: literally minutes after we prepped this chart, Bitcoin was clubbed like a baby seal…

Source: Bloomberg

Ethereum rallied but has been lagging Bitcoin in recent days…

Source: Bloomberg

Spot Gold ended lower on teh day after testing above $2,000 numerous times but unable to maintain it…

Source: Bloomberg

Oil prices fell once again, erasing all of the post-OPEC+ production-cut gains with WTI tumbling to $74…

Most notably, the WTI-Brent spread is now at its smallest (Brent compressing to WTI’s lower price) since Nov 2020…

Source: Bloomberg

Finally, Bloomberg’s Ven Ram notes that investors are erasing the distinction between the safest yields and speculative gains as conviction builds that the Federal Reserve will loosen monetary policy later this year.

Source: Bloomberg

The current earnings yield on the Nasdaq 100 basket is about 3.46%, equivalent to the yield available from 10-year Treasuries. That makes it the smallest equity premium since the early 2010s. A negative risk premium is typically tenable only if aggregate earnings are likely to see a techtonic shift higher or if interest rates are anticipated to slump a whole lot — say, more than 150 basis points within a short span of time.