Markets To Yellen: ‘F**k Off’

“Where’s Janet!?”

Remember this…

The Treasury Secretary tried to fix her faux pas from yesterday, editing some text from her prepared remarks

Deleted paragraph from March 22:

“As I said last week, the US banking system is sound. The federal government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings remain safe.”

New paragraph on March 23:

“As I have said, we have used important tools to act quickly to prevent contagion. And they are tools we could use again. The strong actions we have taken ensure that Americans’ deposits are safe. Certainly, we would be prepared to take additional actions if warranted.”

But she removed the “US banking system is sound”, sparking total chaos. (Bear in mind, as we detailed earlier, that ‘the math just doesn’t work’ for any industry-wide deposit insurance scheme, so what is she going to say?)

Banks saw some hope-filled pre-market gains battered lower with regional banks suffering most. Yellen’s changed remarks sparked a brief recovery, but that didn’t last long as bank stocks tumbled back towards their lows…

FFWM (First Foundation), PACW, ZION, KEY and FRC dominated the downturn (with Yellen’s attempt to save the day failed)…

European bank CDS (5Y) have generally narrowed somewhat since the CS debacle, we do note that short-dated CDS (more used for counterparty risk management among derivatives traders) have not declined with Deutsche Bank remaining extremely high…

Source: Bloomberg

What started off as a relief-rally overnight, with multiple CNBC anchors sighing comfortably that the ‘worst must be over and that the ‘market just needed time to digest how dovish Powell was’; ended an utter shit-show.

Nasdaq, S&P and The Dow all ramped after the US cash open, erasing the post-Powell losses. But that was all she wrote and as Europe closed, everything everywhere went just a little bit turbo as stocks collapsed below yesterday’s lows. The last 30 mins saw a bounce as 0DTE traders unwound earlier negative delta flows at a profit and the S&P bounced off technical support, but overall, all the US majors remain lower than pre-Powell/Yellen levels (Nasdaq the least ugly horse in the glue factory while Small Caps ended below yesterday’s lows)…

It seems pretty clear the market wants to test Yellen and Powell to see if they will step up and bailout the next bank that goes boom in the night.

S&P broke back below its 100- and 200-DMA (after trying to tag its 50-DMA on the morning ramp), then bounced off its 200DMA, back up to its 100DMA… a very technical day…

CRE/Office REITs were hammered again today (‘Big Short 3.0 doing well since we issued on March 9th)…

Source: Bloomberg

Treasuries were more mixed today with the long-end notably underperforming and short-end ripping lower in yield. After Yellen’s remarks, yields extended lower (30Y +1bps, 2Y -17bps). On the week, all yields are lower now except 30Y…

Source: Bloomberg

2Y Yields tumbled back below 4.00%…

Source: Bloomberg

The yield curve saw a major steepening today with 5s30s uninverting…

Source: Bloomberg

Overall, STIRs drifted dovishly with December now pricing in rates 90bps below current levels…

Source: Bloomberg

The odds of a 25bps hike in May have tumbled to 26%…

Source: Bloomberg

Which leaves the Fed’s expected rate-trajectory dramatically more dovish than the ECB’s…

⚠️ Yellen’s the head fake. Remember Europe is the most crowded overweight in equity (and short in bonds). That’s where the biggest liquidation/capitulation risks lie. ECB won’t be hiking or holding if Fed is in deep easing cycle. One of these curves looks wildly wrong $EUR $USD pic.twitter.com/XilXVJXHfW

— Viraj Patel (@VPatelFX) March 23, 2023

The dollar fell for the 6th straight day (10 of the last 11 days), bouncing a little intraday off 7-week lows…

Source: Bloomberg

Bitcoin ripped back up towards $29,000, erasing all of yesterday’s losses, but then faded back after Yellen’s revised remarks…

Source: Bloomberg

Gold surged back above $2000…

Source: Bloomberg

Oil prices rollercoastered again today, with WTI rallying above $71 into the European close and then dumping back down to a $69 handle…

Finally, we note it is the three-year anniversary of the COVID lockdown lows today. Bitcoin is the biggest gainer since that date, bonds are the ugliest of all with the dollar basically unchanged and gold and stocks up handsomely…

Source: Bloomberg

Additionally, it appears alternative currencies are gaining favor since the global financial system started showing cracks again…

Gold has soared over the last two weeks…

Source: Bloomberg

And Bitcoin has dominated everything…

Source: Bloomberg

No wonder the Dems have made crypto the new ‘boogeyman’.