Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B AUM, offering volatility management solutions to its investor base worldwide. Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business since 2008, sending it daily shortly after the market close.
The opinions expressed below are my own
It’s the weekend. US equities gave up a little bit of value today but capital flow was 78%. Investors were checked out today and the tape did what it did. *Maybe* the drop in oil and energy stocks weighed the broader market down today but energy hasn’t influenced the overall market much in a while.
The Treasury market rallied with the equity drop today. Considering that the news was trivial, the treasury moves seem too large to be part of a natural risk-off market reaction. The short treasury trades are very crowded right now. Investors are paying close attention to the record short interest in Treasury futures, etc. The Fed has so clearly telegraphed hiking for the next 2 years it makes a lot of sense that short bonds would be popular.
Anyway, the point is that ahead of a 3-day weekend, it’s not surprising that we got a little bit of a short squeeze today. At least, that’s my thinking. The whole curve fell 3-5 bips and while that’s not a big move, it’s noticeably larger than what we’ve seen recently… and there was no catalyst today… and equities fell trivially.
Next week brings us the all-important nonfarm payrolls data. That’s the pending catalyst of note. Given the Fed minutes release, it’ll take a *huge* surprise to alter the Fed’s plan, so the big catalyst will probably be a big nothing but it’s what we’ve got to look forward too.
The next Fed decision is the following week (June 13th) and a hike is a metaphysical certitude.
Have a great holiday weekend, see you Tuesday,