To Nomura's Charlie McElligott, "another sloppy selloff in Global Rates," feels like UST 10Y running to 2.00 is the “right move” now with the US economy tracking ~6% in Q1.
And as such, the Cross-Asset Strategy MD warns that “Secular Growth” (bond proxy) Nasdaq is being commensurately repriced LOWER relative to peers with more “Cyclical Value” / economic-sensitivity
So let’s recap the drivers of this latest surge:
USTs bear-steepening after the predicted Fed “greenlight,” regardless of the median ’23 Dot location, because JaPo simply stayed on message about not tightening ahead of meeting the Employment and Inflation mandates—check
And as in parallel with the bear-steepening, more of the same US Equities thematic “Cyclical Value over Secular Growth” we expected (Nomura Cyclical Value Factor +0.6% yday and now +31.1% YTD, versus Nomura Growth Factor +0.1% yday and -6.5% YTD)—check
In the meantime as we await Friday’s Op-Ex, $4.9B of Dealer (Long) Gamma in SPX at 3350 holding us tight like a rubber-band—check
Looking-forward and as discussed in recent days, a monster $9.2B $Gamma sits up at 4000 (with a lumpy $4.2B remaining after $4.9B rolls-off front week) which feels like a “round number” inevitability in conjunction with a bullish seasonal for April / May and Spring economic reopening green-shoots for sentiment, so I’ll keep pounding the table on scooping Equities upside into any temporary post Op-Ex Gamma unclench & Delta de-risk lower, particularly if it comes in conjunction with a Rates mini-tantrum that is occuring now.
Thing is, QQQ / Nasdaq looks very different still from SPX, with QQQ Gamma vs Spot remaining “Short” alongside -$1.5B...