tyb/s
no shitta da bread!
S&P Swings Wildly After Breaching 2800 Support As Yield Curve Crashes
see below for moar on negative yields, link provided
On the same day the MSCI Asia index posted its worst daily drop for 2019 as Asian markets caught up with Friday's US pounding, it was another ugly day for US stocks which spent most of the day in the red, with the S&P breaching the 2,800 support level, although the Emini failed to drop below 2790 which has emerged as a new key resistance level.
One possible reason for the solid defense: as Nomura's Charlie McElligott explained earlier, if and when the S&P dips below the "gamma" threshold sell level which is around 2777, both dealers and CTAs would see a pick up in selling, which would then make the market new "default" direction lower and potentially leading to a retest of the December lows.
Curiously, despite the Russell 2000 CTAs, which as McElligott noted earlier are currently 50.4% long, and would sell and flip to short under 1536.21 to get to -100% short, the small-cap index held on, and after some initial weakness, managed to stage a sharp rally into the European close, and successfully remained in the green as institutional buying appeared to offset systematic selling.
The Nasdaq closed just barely in the red, and even though most FAANG stocks were green, Apple disappointed, sliding after its major new services unveiling - including a new credit card, streaming video and a video game offering - disappointed traders, with the stock closing 1.3% lower.
Earlier in the session, Australia’s 10-year bond yield dropped to an all-time low and Japan’s hit the lowest since September 2016.
More concerning was the ongoing slide in the 3 Month-10 Year spread - the Fed's favorite recession indicator - which briefly plunged as much as -7bps before recovering the drop to just -3bps.
It wasn't clear what precipitated today's aggressive buying across the curve, although according to Bloomberg's Edward Bollingbroke, a reason for the move may have been convexity flows (as convexity hedging occurs as mortgage rates fall, making borrowers more likely to refinance; higher expected prepay rates reduce MBS duration, which portfolio managers can then offset via receiving in swaps. It was also a driver behind Friday's Treasuries rally).
Whatever the reason for the aggressive purchases, the US Treasury "curve" is now anything but nd in fact looks like the infamous Nike swoosh, which itself was in the news today when it first Tumbled after Michael Avenatti tweeted he would hold a presser exposing criminality at the sport shoemaker, then quickly rebounded on news that the "creepy porn lawyer" had hoped to extort millions of dollars from the company, only to be arrested shortly after his tweet in the latest vindication for Donald Trump.
https://www.zerohedge.com/news/2019-03-25/sp-swings-wildly-after-breaching-2800-support-yield-curve-crashes
Link on Negative Yields
What does a negative bond yield mean?
https://www.investopedia.com/ask/answers/062315/what-does-negative-bond-yield-mean.asp