10 charts that highlight developments in financial markets
1
Government Supply
Most of the increase in gross US Treasury supply came in the form of T-Bills. The heavy supply helped push up all money market rates.
Source: Reuters
2
LIBOR vs REPO Spread
General Collateral (“GC”) is the rate where you can borrow cash using governments bonds as security. The spreads to LIBOR has widened.
Source: Bloomberg, III Capital Mgmt
3
LIBOR/GC Spread Impacts Swap Spread
The LIBOR/GC impacts short-dated swap spreads. In the last 6 months, LIBOR/GC has widened more than 2-year swap spreads.
Source: Bloomberg, III Capital Mgmt
4
Structural Reform in Europe
Europe has become an easier place to do business, improving long-term competitiveness. At post crisis tights, peripheral spreads reflect the shift.
Source: Deutsche Bank
5
Volatility Across Asset Classes
Other than equities, volatility across asset classes is just moderately higher compared to a year ago. Is this sustainable?
Source: Bloomberg, III Capital Mgmt
6
Equity vs Bond Volatility
YTD, realized 10 day volatility in high-grade bonds is 5% higher; S&P volatility is 560% higher. That is strange, to say the least.
Source: Bloomberg, III Capital Mgmt
7
Stock/Bond Volatility Correlation
The correlation between the VIX (equity vol) and the MOVE (bond vol) has plummeted to zero from 0.60 in Q3 of last year.
Source: Bloomberg
8
Municipal Bonds: HY vs AAA
Despite the widening of corporate credit spreads, HY muni bonds are trading very tight to AAA munis.
Source: Barclays
9
US Yield Curve
A tale of two markets: over the last 5 years, long rates have dropped, but short rates have risen. Bonds are in a bull and bear market simultaneously.
Source: JP Morgan
10
Equity Market Correction
Historically, it takes 135 days for the equity market to recoup losses from a correction. We are only 47 days into this one.
Source: Twitter