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LIVE MARKETS As bond market volatility rises, cash may no longer be trash

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  • All 11 S&P sectors higher, financials lead
  • STOXX 600 down 1.1%
  • European tech shares tumble
  • Gold, oil, dollar, bitcoin lower
  • 10-yr U.S. Treasury yield ~1.44%

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AS BOND MARKET VOLATILITY RISES, CASH MAY NO LONGER BE TRASH (1000 ET/1500 GMT)

Wild swings in U.S. bond markets are making it more difficult to eke out profits with some trading strategies, and may be increasing the allure of holding cash.

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Many large macro funds have been burned by large price swings in U.S. Treasuries as investors adjust for the prospect that the U.S. Federal Reserve will raise rates sooner than previously expected.

Repricing around this prospect has caught many investors offsides and created large daily jumps in short-dated yields, and increasingly choppy trading in longer-dated bonds and the yield curve.

“For the first time in a couple of years…cash has pretty good option value right now,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia.

“Given the degree of fundamental market volatility, the massive positioning swings, what appears to be reduced dealer willingness or ability to warehouse risk, you get some surprisingly sharp moves that are not supported by changes in policy or changes in economic data, and I want to be in a position to take advantage of that. And that’s really where cash’s option value comes from,” LeBas added.

US Yield curve

(Karen Brettell)

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WHICH WAY DO WE GO? (0843 ET/1343 GMT)

U.S. equity index futures were mixed on Thursday, as equities continue to be volatile as a lack of clarity around the severity of the COVID-19 Omicron variant dominates.

Major averages on Wall Street suffered a late session meltdown on Wednesday after the confirmation of the first case in the U.S. and each closed below key technical support levels. read more

Nasdaq futures were pointed to a lower open for the tech-laden index as Apple Inc (AAPL.O) shares were down more than 3% in premarket following a Bloomberg report the company has told parts suppliers demand for its iPhone 13 lineup has slowed. read more

But the price-weighted Dow was looking at a higher open, due in part to a boost from Boeing (BA.N), which rose more than 5% before the opening bell after China's aviation authority issued an airworthiness directive on the 737 MAX that will help pave the way for the model's return to service in China after more than two-and-1/2 years. read more

Economic data showed weekly initial jobless claims rose less than expected, while layoffs fell to their lowest since 1993. read more

Below is your premarket snapshot:

Futures mixed after claims data

(Chuck Mikolajczak)

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FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0830 EST/1330 GMT - CLICK HERE: read more

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Reporting By Sinéad Carew

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