Discussion
HY CDX got creamed, down 12 bps almost back to the June 30 SPX squeeze lows; risk-on sectors led; breadth was strong; and defensives lagged outside of Utilities. Just a really bullish day overall.
Utilities outperformed smartly, which is very much something to watch going forward if it continues alongside any market rallying. But it’s just that at this point - something to watch.
VOL didn’t fall as much as one would expect on a sturdy rally, but ahead of an event like CPI that’s not all that unusual. I would be far more bearish on tomorrow if VOL and HY CDX were solidly green on the day, but that just wasn’t the case today. And going a step further, some interesting color from the flows & liquidity “team”, there was an unusual amount of call volume today, which was likely the culprit for sticky VVIX.
Tomorrow should be explosive. Eyes wide open though to the character of the advance, but especially the move in rates and curves in response to soft Core CPI.