Soft stocks flatten curve

Sept 4, 2020

–DJIA down 2.8%, SPX -3.5% and Nasdaq dumped 5.0%.  So of course yields pressed somewhat lower, with tens ending down 2.7 to 62.2.  Curve continued its retreat from last Friday’s highs, with 2/10 now just below 50, lower by 1.7 on the day.

–Today brings the Employment report, with NFP expected 1.35 million and the jobless rate at 9.8%.  

–Earlier this week TSLA said it would sell up to $5 billion in shares from time to time.  A big tailwind for investors has been share buybacks.  After the stock split TSLA was $500, now $400, a quick 20% power outage.  Could it be that when companies are BUYING their own shares, stock prices are supported and when they are SELLING, the stock price is vulnerable?  

–Then why didn’t that seem to work yesterday when China said it might whittle down its US Treasury holdings to $800 billion from a bit over $1T?  Here’s how THAT phone call might go: “Hello, China Treasurer?  This is Lorie Logan at the NY Fed.  I understand you might want to sell some treasuries?  Yes, ok well I am bid.  Yes, in your size.  Yes, I understand that you didn’t specify, but I did.  In your size.  Yes, whenever you’re ready.  UmOK, let me know…” Click.  

–Having said that, the US Treasury is auctioning over $100 billion in 3, 10 and 30 year paper next week at very skinny yields.  Possible indigestion? 

Posted on September 4, 2020 at 5:53 am by alexmanzara · Permalink
In: Eurodollar Options

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