Nasdaq moving because of…futures?
March 9, 2021
–Nasdaq yesterday accomplished a 10% decline from February’s highs. My first e-mail of the morning was from BBG, starting with “Tech shares get pummeled”. Of course as of this morning, futures are surging back with NQH up 267, and some of the news sites are braying about a Nasdaq comeback based on….futures. It’s a volatile market, subject to large move on no news. Recently many have pointed to long term rates or curve steepening as a catalyst for Nasdaq weakness, and are noting that yields are a touch lower this morning…before CPI tomorrow and auctions of 10s, 30s, tomorrow and Thursday.
–Today we get NFIB expected 97 from 95 last, and $58 billion of three year notes, which were 35 bps late yesterday versus a 2-yr of 16 bps. So there’s a decent amount of juice in that third year forward, which of course is reflected by the red/green euro$ pack spread (2nd to 3rd year) at a new high of 54 bps yesterday. In fact, all euro$ one-year calendars from EDU2/U3 thru EDM3/M4 made new highs yesterday; the peak is EDH3/EDH4 at 72.5, nearly 3/4%, up 3.5 on the day.
–Several large option trades suggest the market continues to pull forward the time for the start of Fed hikes. An exit sale of 15k USH 157/153 put spreads from 1’24 to 1’20. A new buy of 30k TYK 131.5/128ps for 45 to 47, settled 48 vs 131-28 with 34d. And in dollars, a new buy of 50k 0EQ (EDU2 underlying) 9975/9962/9950 put butterfly for 3.0 vs various futures, settled 2.75 vs 9967.5. The 10/30 spread declined by a few bps with the ten-year yield up 4 to 159.4, and thirties up just 1.6 bps to 230.3. However, late in the day there was a block of +3500 UXYM 145-19 vs sale of 5410 WNM at 185-02. Looks to me to be an extra $1.4m DV01 on the ultra bond. Just because the long bond yield is now rising more slowly than tens, doesn’t mean yields stop going up.
