Bitcoin & Bullion Surge, Stocks Purge, As EU Credit Crisis Risk Re-Emerges

The biggest headlines of the day – apart from Joe-Rogan-related ones – came out of Europe as sovereign yield spreads starting act a lot like 2011 as the market fears facing reality of an ECB that is about to turn off the free-money spigot.

Source: Bloomberg

As the yield-spreads blow out wider, so the risk of an ‘exit’ of one of the peripheral nations grows, and today saw the market start betting on ‘Italeave’…

Source: Bloomberg

While Bund yields have blown out, European investors can still find yield advantage (FX-hedged) by swapping to USTs (but as the chart shows, the premium for USTs over Bunds is at its lowest since July 2020…

Source: Bloomberg

Still, while European bond market participants had a bad day, it was likely not as bad as this poor American skier…

Nina O’Briens crash. Eeeeek #Beijing2022WinterOlympics pic.twitter.com/4J1890T2GC

— Andy Mullen (@AndrewJMullen) February 7, 2022

European stocks limped higher into their close (thanks to some cooing from Lagarde) and US equities all went bid after Europe closed, lifting everything green for the day. That lasted until the last 30 minutes, where, much like Friday, a wave of selling hit and all the US majors puked hard. Only Small Caps ended green on the day with Nasdaq down 1%…

The Dow found support (again) at its 200-DMA, and the S&P oscillates between its 100- and 200-DMA

Amid all the Rogan drama, the Rumble CEO stirred the pot in a major way and the SPAC it is set to merge with exploded higher…

Spotify got no bounce from the CEO’s comments…

And then there’s Peloton which surged Friday on rumors of ‘suitors’ but slipped all day long today (still ending notably higher)…

European corporate credit risk is also getting hit, and is now in with US HY spreads…

Source: Bloomberg

US credit risk is decidedly blowing out - with High Yield Corporate Bond yields back at their highest since April 2020…

Source: Bloomberg

As Bloomberg notes, after the worst January slump since 1980 and elevated risk for better-rated debt, given their higher-duration, some investors may be looking to cut their losses. All eyes are on fund flows, which have been mostly negative since December and vulnerable to steeper declines.

And credit and equity in the US remains notably decoupled…

Source: Bloomberg

Treasury yields ended the day almost unchanged, trading in a narrow range on the day, going nowhere since the payrolls spike…

Source: Bloomberg

The dollar was weaker today, erasing all the post-payrolls spike gains…

Source: Bloomberg

Cryptos extended their recent rally with Bitcoin back above $44k, its highest in a month…

Source: Bloomberg

And broke above its 50DMA on the KPMG news…

Source: Bloomberg

Notably Bitcoin has decoupled from tech stocks recently after trading tick for tick with an extremely high correlation in January…

Source: Bloomberg

The other non-fiat alternative currency safe-haven – goooolddddd – also surged higher, back above $1820…

Oil prices slipped modestly lower on the day…

Finally, in case you wondered just how much time you have to liquidate your exposures in this entirely illiquid market, the answer is not much. In aggregate G10 Central Bank holdings are set to peak during summer 2022…

Just in time for the midterm elections in the US!