Bonds Bloodbath, Dollar Dumped As Omicron Anxiety Ebbs & Flows

Bonds Bloodbath, Dollar Dumped As Omicron Anxiety Ebbs & Flows

Anxiety over Omicron was higher overnight from South African data showing Pfizer vaxx efficacy weakened against Omicron… but then the CEO of the company that makes billions from the vaccine – and is protected from any liabilities – said, all you need is a 3rd jab and that will save you all from Omicron… and the market rejoiced.

Small Caps outperformed today but traded in a truly chaotic manner. The Dow ended the day unchanged-ish and S&P and Nasdaq modestly higher…

Notably, the major US equity indices remain unable to extend gains above pre-Omicron levels…

‘Recovery’ stocks continue to charge higher relative to ‘Stay at Home’ stocks…

Source: Bloomberg

Despite all the jawboning, Pfizer, BioNtech and Moderna are all down on the week…

Source: Bloomberg

VIX plunged back below 20 today…

Bond yields exploded higher today (amid a very heavy calendar). 30Y Yields are up 20bps this week while 2Y is only up 8bps…

Source: Bloomberg

30Y Yields remain well below 2.00% (pre-Omicron) levels, but today was a decent squeeze to say the least as 30Y spiked over 13bps from low to high yield…

Source: Bloomberg

Or put another way… everything was beautiful for the bond bulls… and then it wasn’t…

The yield curve steepened dramatically today (2s30s’ biggest steepening day in 2 months), but remains notably flatter – and expecting a policy mistake – since Powell went hawktard…

Source: Bloomberg

The dollar dumped to its lowest close in 3 weeks…

Source: Bloomberg

Cryptos continued to tread water post the weekend plunge…

Source: Bloomberg

WTI managed modest gains today…

As Carbon Offset costs continued to soar

Source: Bloomberg

Finally, the number of U.S. job openings exceeded the number of unemployed Americans by the most on record in October

But we’re still printing 10s of billions a month and holding rates at ZIRP?

So what happens when Powell pulls the plug? Who knows but it’s worth noting that the real earnings yield for the S&P 500 Index hasn’t been so deep into negative territory since 1947… and BofA strategists warn that this portends downside risks for stocks.

There have been only four historical instances of negative real earnings yield, all of which resulted in bear markets, the strategists led by Savita Subramanian wrote in a note to clients, advising investors to seek refuge in inflation havens, such as energy, financials and real estate. Without continued earnings growth, stock investors will be losers in inflation-adjusted terms, undermining the so-called TINA argument that “there is no alternative” to equities right now.

Tyler Durden
Wed, 12/08/2021 – 16:01

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