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2/6/24
#Stocks – $NYCB $8304 JP
#Macro – $SPX, $DXY, #RATES
Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha
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It was a boring day on the surface, mostly inverse to yesterday. Today, the S&P 500 was flat nearly all day but managed to see most of its gains of 20 bps come in the final 5 minutes of trading.
The VIX was also down today, and the implied correlation index was up, not something we have seen generally, and it is really suggestive that the volatility dispersion trade is not working. Generally speaking, when the VIX goes down, one really needs the IV of the stocks in the S&P 500 to go higher. But with the correlation index going higher today and the VIX going down, it implies that the IV of the stocks went down too, which they did except for Nvidia.
The other interesting thing was that today’s 1-week 50 Delta S&P 500 option was higher, which was surprising, to say the least.
The HYG is at an important spot and has an interesting pattern. Is it either a broken triangle or a potential triple top? Not sure; I think we need confirmation of what is going on, and if the case that rates are going higher, one would expect the HYG to drop below $76.50
I guess what is odd is that while all of this is going on, regional banks are struggling again. They are being led lower by New York Community Bank, which fell 24% today and was battered over the last few days after having larger-than-expected loan loss provisions for its commercial real estate portfolio.
This follows the massive drop in Japanese-listed and traded Aozora Bank (8304 JP), which also increased the loan loss provision for loans tied to, you guessed it, its US commercial property loans.
Maybe it is just by chance that two banks on opposite sides of the world are having issues with US commercial real estate; I do not know. But I’d think that Treasury Secretary Yellen saying that she has concerns about US commercial real estate probably doesn’t help.
I guess why I bring this up is because I am surprised to this point to see credit spreads on the CDX High Yield Index, kinda chillin’
So, going back to the HYG ETF, it is probably worth keeping an eye on that.
-Mike
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