Crypto, Crude, & Credit Soar In April Amid Dollar, Bond Yield Explosion

For many investors in April…

Earnings up, stocks down…

 

Stocks managed to cling to gains in April for the first time since January…

 

And while Stocks ended almost unchanged, VIX tumbled in April – erasing all of February’s spike…

With VIX seeing its biggest monthly decline since July 2016… (NOTE – the seasonality in VIX in April/May in the last few years)…

Large speculators have cut their bets for turbulence in the stock market, as Bloomberg notes that After hitting a record earlier in April, the number of net-long positions on VIX futures plunged by more than 46,000 contracts, one of the fastest paces ever,

And finally on VIX, it appears the 15 level – seen as the ceiling for the vol index last year – is now the floor…

As Bloomberg reports, it doesn’t necessarily tells us where we go from here, but it shows that when the trading regime shifts, it tends to be swift and lasting. For what it is worth, the VIX averaged about 13 during the second half of the Fed’s tightening during the 2004-2006 cycle. So vol may have some room to decline, but not that much.

HY Credit spreads plunged in April (along with VIX) – the biggest monthly spread compression since Feb 2017…

Treasury yields ended the month higher across the curve…

Just as we warned, CTAs tried – and failed – to break 3.00% for good on the 10Y Treasury yield in April…

(And 10Y is now back the same level as the highs on fed rate hike day and 30Y Yield is 2bps below pre-rate-hike levels)

Despite the greatest short bond position in history…

And while yields were higher on the month, the yield continued its collapse – down 8 of the last 9 months, and 14 of the last 17 months… to the flattest since Oct 2007

 

The Dollar Index soared in April – its biggest monthly rise since Trump’s election in Nov 2016…

 

What is perhaps most notable in April is the surge in the USD and bond yields coincided with HKMA’s needing to intervene in the FX markets to sustain its peg band to the USD…

 

Cryptos had a yuuge April with Bitcoin up over 35% -the best month since 2017…but Bitcoin Cash was the big winner – up 100% in April…

 

Despite the huge gains in the dollar, April saw commodities generally unmoved (except Oil)…

 

WTI Crude was up for the 8th month in the last 10 in April to its highest monthly close since Nov 2014…

Silver notably outperformed gold mid-month but the last week or so has seen that unwound…

Finally, April saw a total collapse in ‘soft’ survey macro data – the biggest monthly drop since Feb 2015…

*  *  *

On the day, it was quite a frenetic day session as stocks opened higher, exuberant on earnings then gave it all back as Bibi broke the dead-cat-bounce’s back… Futures show the overnight exuberance faded at the open despite good earnings as hawkish comments from Bibi sent stocks reeling…

Cash markets ended the day “not off the lows”…

The Sprint, T-Mobile deal sparked some chaos…

 

Bank stocks gave up early gains…

Treasury yields were all lower on the day… (Japan was closed)

 

And the yield curve kept flattening…

 

The Dollar rebounded from Friday’s losses today but was unable to reach Friday’s highs…

 

Cryptos are up from Friday’s close…

 

Commodities were weaker on the dollar gains but crude managed to jump on Bibi statements…

WTI spiked today after Israeli Prime Minister Benjamin Netanyahu said Iran is lying about its nuclear weapons. But note that $69 was once again a resistance level…

 

 

 

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