Goes without saying that March, 2020 has been insane. The fall in equities was accelerated by an insane gap down in oil (Russia-Saudi logjam). Russel 2000 has given away gains from the last 7 years. Big US banks like Wells Fargo are down in half.
Liquidity in fixed income has gone for a toss. Fed intervened with repo as funding pressures led to bad 'market making'. Corp bond and junk bond markets had a meltdown. Sustained high VIX is forcing deleveraging across assets.
All throughout the last week, FX however was very well behaved. That changed today.
Yesterday, there were rumors since early afternoon (talks on since Sunday infact) that a Commercial Paper Funding Facility (CPFF) was going to be launched by the Fed. Soon we saw ZP issue a note (https://plus.credit-suisse.com/rpc4/ravDocView?docid=V7lLnU2AN-SO8) which argued against the utility of such a facility. However, the same night (a couple of hours after the note), the Fed announced that it will indeed launch the CPFF.Why today is important
Fixed income
Munis took a big hit today. Some Municipal CEFs were down more than 15%
The long end of the fixed income curve broke. 2s10s saw levels last seen in 2016 (see image on the left)
Ultra bond futures breached the 200 level
Equities
S&P came extremely close to hitting the second circuit down. That last hour of trading was one roller coaster
ES had very low liquidity. Bid-ask in single digits.
Brazilian IBOVESPA was down 15%
Risk parity blowup
The risk parity trade blew up as bonds and equities fell together
"Bridgewater All Weather 12% Volatility Risk Parity Fund" down 14% for 2020
"Bridgewater Pure Alpha 18% Vol Hedge fund" down 21% for 2020
Forex
Forex finally reacted to what all is happening in the world. Dollar strength across the board.
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