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Oil continued to move lower, and the dollar was noticeably weaker. Treasury yields declined across the board—not just in the U.S. but globally, with rates in the UK, Europe, and Japan remaining flat overnight. It seems like rates are taking a breather after significant moves over the last few weeks. This pause feels normal and hasn’t changed my long-term view on where rates are headed, especially if we are near the end of the Fed’s rate-cutting cycle. Of course, this depends heavily on where inflation, growth, and employment trends go.

Regarding equities, the market appears to be catching its breath, allowing for some rebound. For instance, the RSP (the S&P 500 Equal Weight Index) outperformed today, rising about 1.16%, while the S&P 500 itself was up roughly 90 basis points. Resistance for the S&P 500 cash is around 6,085.

Volatility is another area worth noting. Realized volatility over 10, 20, and 30 days hovers in the 15–17 range. Today, the VIX closed at 15, while realized volatility stood at 16.7 for 10 days, 15 for 20 days, and 15.8 for 30 days. With daily moves averaging 80 basis points, it’s unlikely we’ll see realized volatility drop much further. Meanwhile, the VIX’s nine-day implied volatility gauge rose slightly by 0.18 to 14.31, indicating potential risks ahead with next week’s Fed meeting on Wednesday and the BOJ meeting later this week.

Also noteworthy is the one-month implied correlation index, which fell over two points today, settling at 9. Historically, this is at the lower end of the range, and past dips to similar levels—like in August, November, and December—have typically marked a bottom before implied correlations rose again. This suggests limited downside potential for implied correlation from here unless the VIX drops significantly, which seems unlikely given the current market volatility.

Finally, regarding equity funding: S&P 500 total return futures for March, adjusted for BTIC interest rates, traded down to 61.5 today, slightly below Friday’s close of 63. This indicates limited demand for leverage and margin redeployment, unlike the year-end period when equity financing costs spiked.

Have a great evening, and I’ll see you tomorrow!

-Mike

1. RSP (S&P 500 Equal Weight Index): A version of the S&P 500 where each company is equally weighted.

2.VIX (Volatility Index): Measures the market’s expectation of 30-day volatility based on S&P 500 options.

3.Realized Volatility: The actual historical volatility of a security or index over a specific period.

4.Implied Volatility: The market’s forecast of future price volatility derived from options pricing.

5.Implied Correlation Index: Measures the expected correlation of stocks within the S&P 500 based on options pricing.

6.B-TIC (Basis Trade at Index Close): A futures trading mechanism aligned with the index’s official closing price.

7.Fed Meeting: Federal Reserve meeting to decide on interest rates and monetary policy.

8.BOJ Meeting: Bank of Japan meeting to decide on Japan’s monetary policy and interest rates.

9.Ten-Year Treasury Yield: Return on a U.S. government bond with a 10-year maturity, a key interest rate benchmark.

10.Realized Vol (Short for Volatility): Abbreviation for historical price volatility.

11.S&P 500 Total Return Futures: Futures contracts reflecting both price appreciation and dividends of the S&P 500.

12.Dollar Weakness: Decline in the U.S. dollar’s value compared to other currencies.

13.Basis Points (BPS): A unit equal to 0.01%, used to measure interest rates or percentages.