Big Tech, Bonds, & Bitcoin Bounce As Yield Curve Inversion Deepens

Barely any US macro today (Richmond Fed marginally worse than expected), but China Zero-COVID chaos and a double whammy of hawkish FedSpeak (though the market seemed shocked by the fact that The Fed will not be hiking rates at 75bps a click forever)…

• Mester: “Given the high level of inflation, restoring price stability remains the number one focus of the FOMC…monetary policy entering a different cadence.” Translation – we are hiking no matter what, but the pace of hikes may slow.

• George admits Fed buying MBS stoked surging home prices, adding that it “could well take a higher interest rate for some time to convince households to hold onto savings.” Translation – we are hiking rates more and holding for longer.

… sent yields lower but stocks higher as recession-hope-driven rate-cut expectations next year picked up a little…

Source: Bloomberg

The yield curve is inverted-erer!! Everywhere…

Source: Bloomberg

With The Fed’s self-admitted ‘most accurate’ spread (3m10y) now at its most inverted since Lehman…

Source: Bloomberg

Treasury yields tumbled across the curve with belly outperforming (5Y -8bps). On the week, 30Y Yields are down around 10bps while 2Y are down 2bps…

Source: Bloomberg

The bid for longer-dated bonds helped spark a bid for longer-duration stocks with tech surging (Nasdaq swinging from -0.4% at the cash open to over 1.4% higher by the close). The S&P tracked Nasdaq tick for tick on the ramp higher in the last hour…

After 4 straight days higher following the CPI purge, the dollar drifted lower all day today…

Source: Bloomberg

Bitcoin managed some gains today, back above $16,000…

Source: Bloomberg

Oil pries rallied (despite some late weakness as EU eased sanctions on Russia’s crude) with WTI rallying up to $82 intraday…

A roller-coaster day for gold ended unchanged after overnight gains were sold during the EU and US sessions…

Finally, it appears the annual VIXuberance has hit into Tnxgiving weekend as traders avoid the vega/theta leakage of a 4-day weekend.VIX dropped to a 21 handle and S&P topped 4000…

Source: Bloomberg

Unless tomorrows data is a downside shitshow shock, it’s likely that realized volatility continues lower, particularly with the US holiday. This likely keeps pressure on IV, which is a tail wind for equity markets.