When does stimulus become NEGATIVE for stocks?

February 23, 2021

–Yields at the very front end are underpinned by low libor settings and talk of negative t-bill rates as the gov’t draws down its TGA balance.  The first four eurodollar contracts were unch’d except EDZ1, down 0.5.  The red pack was -0.375.  However greens and blues were both down 3.  New highs once again in most curve measures with 2/10 up 2.5 bps to 126.  The ten year yield rose 3 bps to 137.2.  Implied vol in treasuries is making new recent highs on the move to lower prices.  

–Big tech appears to be rolling over with AAPL closing 126, its lowest close of the year.  Bitcoin continues to trade under pressure, now nearing 47k.

–Powell appears before the Senate banking committee for semi-annual testimony.  The summary was released Friday and maintains a downbeat tenor, even as news stories are indicating that factories are having trouble satisfying increased demand.  WSJ headline: ‘Consumer demand snaps back. Factories can’t keep up.’  As usual, Powell will downplay inflation and focus on employment shortfalls.  The reaction in stocks should be interesting….previously more stimulus equated with more stock buying.  Now the market is becoming more attuned to Powell’s comments with respect to forward rates, and the implications are much less positive for equities.

Posted on February 23, 2021 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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