The bull market seemed to show fine cracks in yesterday’s price action. First up is fixed income, where massive corporate and government bond issuance is finally causing some indigestion, with $20 billion of corporate bond issuance on Monday following $60 billion of new supply last week, bringing February issuance to $145 billion so far, just $5 billion shy of last year’s all-time high, while 2-year and 5-year Treasury issuance also reached $63 billion and $64 billion, respectively, with both auctions seeing muted demand, causing yields to rebound to near December highs and give up all of their year-to-date gains.
Stocks fared slightly better, though both the Nasdaq and SPX ended lower on expectations of month-end rebalancing. With the SPX (+4.8%) having significantly outperformed Treasuries (-1.5%) this month, Wall Street is expecting a sizeable rebalancing move into bonds in the coming days.
Despite rising stock prices, investors continued to flock to the stock market, with only net positions in Hong Kong stocks showing a negative trend. According to a survey by Bank of America, the proportion of investors who expect the U.S. economy to never land (that is, the economy will not recession) has risen to 41%.
Speaking of FOMO, as of this writing, BTC has jumped to nearly $57, 000 and the market seems to be entering accumulation mode. Microstrategy’s announcement of an additional $150 million in BTC (total holdings of nearly $10 billion, at a low cost of $31,000!) has once again boosted market confidence, while the decline in outflows from GBTC and continued inflows into new ETFs further support the narrative of mainstream market participation.
Meanwhile, ECB analysts took the opportunity to reiterate that despite the ETF approval, “cryptocurrency is worthless” as the asset has no intrinsic value (or anything like that), and that perhaps buying negative yielding bonds (roughly from 2016-2021) would have been a better “investment decision” for pension funds for central bankers…
