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June 12, 2020

Rates Fall Sharply as Virus Concerns Continue

Treasurys continue to rally, risk assets tumble as market shifts focus to “second wave” fears. Treasury yields and swap rates rallied sharply across the curve yesterday as fears around a second wave of US COVID-19 infections precipitated a re-rating of risk assets. The 10-year yield fell 9 basis points on the day, extending a rally that’s seen rates fall nearly 30 basis points below their recent highs at the long end of the curve. Equities also fell sharply lower, the S&P 500 and DJIA falling over 6% on the day after climbing to within 5% of all-time highs earlier this...

June 12, 2020

Rates Lower After FOMC Announcement, Disappointing Initial Jobless Claims

Another wave of coronavirus cases could be under way. On Wednesday, Texas reported over 2,500 new infections, marking it the highest daily total since the beginning of the pandemic. California, Florida, and Arizona are among other states reporting a rise in cases. Health experts are watching closely for a spike after mass protests were held in every state across the country, believing there to a possible correlation between the two. The White House coronavirus task force has yet to provide color on if reopening has caused the recent spike in cases. Thus far, there have...

June 10, 2020

Rates Fall Ahead of FOMC Rate Announcement

Rates fall ahead of FOMC announcement. Yesterday, the Fed kicked off their two-day rate setting meeting. The market consensus points to the Fed leaving their target remaining unchanged at 0%-0.25% with talks of potential negative rates evaporating. Economists expect major topics of discussion to include added stimulus, expected recovery period forecasts, and future easing. Thus far, the Fed has unveiled multiple lending facilities with the Main Street Lending Facility under most scrutiny. Fed Chair Jerome Powell has made multiple revisions regarding its target borrowers,...

June 9, 2020

S&P 500 Erases 2020 Losses as Last US City Reopens After Lockdown

US equities surged on Monday, erasing 2020 losses as New York City, the final US city left on lockdown, enters phase one of reopening. New York City began reopening yesterday as 400,000 workers returned to construction jobs, manufacturing sites and retail stores in “phase one” of the four phase reopening process. New York City was the final US city left on lockdown, and now joins the rest of the country in beginning a long path to economic recovery. Meanwhile, US equities continued their torrid rally yesterday, the S&P 500 climbing back to flat on the year while the...

June 9, 2020

Risk Assets Climb Ahead of FOMC Meeting

Risk assets have continued their “melt-up” this morning, continuing the positive momentum kicked off by Friday’s surprisingly upbeat jobs report. The S&P 500 and DJIA sit 0.81% and 1.21% higher on the day – bringing the S&P 500 within 5% of its pre-COVID all-time high. Swap rates and Treasury yields are modestly lower across the curve after jumping higher on Friday while the VIX or “Fear Index” has continued to decline- falling to its lowest levels since the coronavirus outbreak.

June 5, 2020

Blockbuster Jobs Report Sends Rates Sharply Higher

Jobs report shows unexpected rise in nonfarm payrolls, fall in unemployment rate. The labor market defied forecasts that had called for a decline of 7.5 million jobs in the month of May, adding 2.5 million jobs while the unemployment rate fell to 13.3% (estimates had called for unemployment to peak at 19%). Average hourly earnings declined on the month, but likely as a result of a recovery in lower-wage jobs. The “U-6 rate” which represents underemployment (unlike unemployment it includes those who haven’t searched for a job recently) fell to 21.2% from 22.8% in the month...

June 4, 2020

Rates Rise as Private Payroll Figures Beat Expectations

Treasury yields and swap rates break out higher as private payroll figures surprise. The ADP private payroll figures for May, a precursor to Friday's jobs report, declined by 2.76 million, well below the forecasts that had called for a decline of 9 million. The ISM non-manufacturing index remained below the 50 point threshold, but rose to 45.4 (business activity alone rose 15 points). The positive data helped rates climb higher, the 10-year Treasury yield breaking above 0.72% for the first time in a month as rates rose across the curve. Equities also continued their march...

June 3, 2020

Risk Assets and Rates Continue to Climb on Better than Expected ADP Data

Major indices rise for third consecutive day as valuations approach 2000’s levels. The S&P 500 and Dow Jones Industrial Average rose for a third consecutive session yesterday as markets once again shrugged off nationwide protests (and conversely fears that mass protests may result in a resurgence in COVID-19 infections). The two indices would climb higher by 0.82% and 1.05% respectively while the VIX or “Fear Index” declined to 26- its lowest level since the outset of the global pandemic. This morning, rates and  global equities are higher once more, the latest rally...

June 2, 2020

Equities Rise Despite Domestic and International Uncertainties

Stocks continue to ignore weak economic data, civil unrest, geopolitical tensions. There’s no shortage of news/data pointing towards the struggling of the US economy and its outlook, however major stock indices remain resilient in their rise, touching thee-month highs this morning. Yesterday we received ISM and PMI manufacturing data for May, both which reflected another monthly slowdown in factory activity, albeit slightly better than April’s 11-year lows. The projected impact of COVID-19 on the US economy remains wildly bleak, with the Congressional Budget Office estimating that a full...

June 1, 2020

Rates Climb Despite Rising US-China Tensions and Mass Protests

Equities dip amid rising US-China tensions, mass protests. US equities are opening lower this morning on the news that China will halt purchases of certain US agricultural goods. The suspension is the latest in a series of escalations between the world’s two largest economies, and comes days after President Trump moved to eliminate Hong Kong’s special trading status. The quick rebound in economic activity priced into risk assets also seems to be somewhat in question, the WSJ reporting that most COVID-19 forecasts don’t expect daily confirmed cases to fall below 1,000 until the end of July...

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