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    Gundlach on the recent bond move

    "Since August 6, 2020 the yield on the 30 Year US Treasury Bond has been rising at a 200 basis point annual rate. If that continues through August 6, 2021 the Bond’s year-over-year total return will be approximately -35%"

    Gundlach

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    biggest combined weekly losses for TLT + SPY since March
    biggest combined weekly losses for TLT + SPY since March
    Source: @kgreifeld
    HYG outflow follow-through: starting to look serious
    HYG outflow follow-through: starting to look serious
    Source: Bloomberg
    Everyone wants to be an entrepreneur

    Americans are starting new businesses at the fastest rate in more than a decade

    Everyone wants to be an entrepreneur
    Source: WSJ
    China favored
    China favored
    Source: EPFR
    The China engine is seemingly unstoppable

    The October NBS manufacturing PMI came in at 51.4, slightly better than expectations and only marginally lower than the 51.5 reading in September

    The China engine is seemingly unstoppable
    Source: NBS
    Sober October
    Sober October
    Source: Bloomberg
    Last week
    Last week
    Source: Bloomberg
    US COVID in 4 charts
    US COVID in 4 charts
    Source: Bespoke
    U.S. reports 97,000 new cases, biggest one-day increase on record

    New cases: 97,080

    Positivity rate: 7.1% (+0.4)

    In hospital: 46,688 (+593)

    In ICU: 9,437 (+229)

    New deaths: 933

    COVID Tracking Project
    work from home

    Working from home during the pandemic, Americans saved 60 million hours in commute time each workday. We spent most of that time —working

    https://www.wsj.com/articles/with-no-commute-americans-simply-worked-more-during-coronavirus-11604050200

    WSJ
    Still value in value...
    Still value in value...
    Source: Datastream
    Busy week coming up

    US elections

    Fed and BoE

    Usual weekend coronavirus surge (or not)

    Restrictions kicking in...how will they affect macro data, final Oct PMIs throughout the week

    224 companies between S&P and Stoxx 600 will report earnings

    Mighty USD

    Mighty for several reasons, below just a few...

    Mighty USD
    Source: GS
    Retail sales in EU defies gravity

    What virus?

    Comfort shopping

    Retail sales in EU defies gravity
    Source: Pantheon
    Oil - they buy it or sell it but still no interest
    Oil - they buy it or sell it but still no interest
    Source: MPAS
    China High Yield property: the trend is up

    (in yields)

    China High Yield property: the trend is up
    Source: The Yield Book
    Manage your risk dynamically - the Apple example

    Frequent readers of TME know we have written extensively on using options to enhance yield, especially for people that "must be long a certain name".

    Apple has been one of those. OnSeptember 1, Apple ATH close, we wrote:

    "The point is not trying to guess the top in Apple, but from a risk management point of view Apple overwriting strategies make a lot of sense.

    Retail armyhas been buying tech calls en masse, leaving dealers short gamma. Since the FAANGs have exploded, short gamma dealers have found themselves in a lot of trouble, chasing deltas higher, and at the same time seeing vols explode making "real hedging" even more expensive.

    Dealers tend to be reluctant to buy back higher vols as they have a big belief in their "theoretical" models. Since volatility is mean reverting, dealers tend to sell more and more volatility as "it must revert".

    In the meantime, retail army buys more and more options, dealers chase deltas higher and higher etc. Of course, the same works on the way down, but inversely. When the stock goes through the strikes on the way down (if ever) all those chased long deltas must be sold again.

    We can write a book about the above "dynamics", but the main point is, Apple vols have exploded due to the above, and anyone that is getting a bit "nervous" about their Apple longs, but must be long, should look at overwriting strategies here."

    Apple vs VXAPL
    Manage your risk dynamically - the Apple example
    Source: Refinitiv
    Bond vol eventually "got" VIX moving, but looks like bond vol is not getting excited about the latest VIX move

    Big fish vs small fish...

    MOVE index vs VIX
    Bond vol eventually "got" VIX moving, but looks like bond vol is not getting excited about the latest VIX move
    Source: Refinitiv
    VIX - today was the biggest negative candle in a long time

    It sure did not "feel" that way...

    VIX - today was the biggest negative candle in a long time
    Source: Refinitiv
    S&P - just (mean) reverting to HYG

    HYG in chill mode today...

    S&P - just (mean) reverting to HYG
    Source: Refinitiv
    The rallies start to feel like they are decaf

    Not talking about equity rallies here but the Trump ones.

    The rallies start to feel like they are decaf
    Source: JPM
    VIX - shaken, not stirred

    Things are not trading well, but there is no real panic in this move lower.

    VIX actually closed higher two days ago, but more importantly the VIX 2/8 mths spread has not shot up much higher during this sell off like we have seen it explode during the past "hiccups".

    Demand for short term VIX futures is not overly extreme.

    The spread is elevated, but there is not the panic bid for vol.

    VIX - shaken, not stirred
    Source: Refinitiv
    Still room for some relative plays should those yields continue to move higher and people start thinking about "duration" plays

    5 year chart of XLF vs XLK in %.

    Still room for some relative plays should those yields continue to move higher and people start thinking about "duration" plays
    Source: Refinitiv
    Yields and tech - we discounted tech at low rates, what about discounting at higher rates?

    Do not dismiss tech's longer term "duration" risk...

    US 30 yr inverted vs QQQ.

    Yields and tech - we discounted tech at low rates, what about discounting at higher rates?
    Source: Refinitiv
    Still staring at that US 30 year yield chart

    Will it break above that big trend line?

    Still staring at that US 30 year yield chart
    Source: Refinitiv