End of day howl!

Starting from today we are starting the "End of day howl" update. Here we will summarize the main events of the day taking all the noise and drawing some conclusions.

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  1. The realization that the current pandemic will result in a massive spending boost by governments around the world has spooked bond investors. A wave of new sovereign debt will be hitting the markets shortly. Despite the extreme risk aversion and a historic repricing in stocks and credit, government bond yields are climbing. There is nowhere for investors to hide.

  2. This sharp selloff in both bonds and stocks is highly unusual.

  3. Investors are flooding into Treasury bills, rapidly shrinking their portfolio durations. T-Bill yields have turned negative.

  4. Central banks are stepping in to absorb some of the extra supply of government paper.


  1. The Fed will backstop money-market mutual funds after massive outflows in recent days. The memory of money market funds breaking the buck after the Lehman default haunts some Fed officials.

  2. Credit markets are under severe pressure.

  3. Investment-grade firms have lengthened their debt maturities in recent years.

  4. However, over $500 billion of US investment-grade (IG) corporate debt is set to mature in the next 12 months. This is around 7% of the IG market and just less than half the size of the high-yield market, according to Deutsche Bank.


  1. How many years of gains have been wiped out by the recent market drop vs. other sell-off events?

  2. Expectations for earnings growth still appear consistent with a strong economic expansion this year.

  3. According to Stifel, the 2017 tax cut and low nominal bond yields are two factors that could keep the S&P 500 in the upper half of the range above 1800.

  4. Hedge funds are down but are outperforming the S&P 500 so far this year.

  5. Growth shares may soon peak relative to value.

  6. Healthcare is holding long-term support relative to the S&P 500.


  1. The rout in industrial metals has worsened.

  2. Precious metals continue to struggle as investors give up on safe-haven assets.


  1. US crude oil fell to the lowest level in 18 years.

  2. US gasoline futures hit the lowest level since the contract was launched in 2005.

Emerging Markets

  1. Global investors continue to dump EM assets, with many currencies hitting multi-year or record lows.

  2. EM outflows are already more severe than the 2008 crisis.