Risk Binge or a Bubble? Signals From Real Yields Split Investors

Nov 9, 2021

Lead Stories

Risk Binge or a Bubble? Signals From Real Yields Split Investors
Libby Cherry – Bloomberg
Another week, another record low for bond yields. That’s spurring a splurge on risk by investors and also fresh warnings they’ll live to regret it.
With inflation-adjusted yields known as real rates plumbing new depths, growing confidence central banks will keep in place pandemic-era backstops is fanning a run-up in crypto to credit. And that’s all as the S&P 500 is hitting record highs.

The Fed warns of social media ‘echo chambers’ that pump up meme stocks.
Jeanna Smialek – The New York Times
Stocks that experience major volatility as a result of social media attention — often called meme stocks — have not threatened broader financial stability so far but could open the door to vulnerabilities, the Federal Reserve said in a report on Monday.

Fed Warns of Peril in Run-Up of Risky Asset Prices, Stablecoins
Jesse Hamilton – Bloomberg
The Federal Reserve is warning that prices of risky assets keep rising, making them more susceptible to perilous plunges if the economy takes a turn for the worse, and cited stablecoins as an emerging threat.
“Asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall,” the Fed said in its twice-yearly Financial Stability Report released Monday.

The Stock Market ‘Melt-Up’ Keeps Going. A Unique Trend Is Emerging.
There is just no stopping the U.S. stock market.
The S&P 500 closed higher for the eighth consecutive day on Monday, its longest winning streak since April 2019. Plenty has been thrown at the market in that time, including the Federal Reserve’s tapering announcement and continued inflationary pressures, but nothing yet has halted the momentum. Even Tesla’s 5% slump couldn’t ruin the party.

SOFR First Slowly, Then All at Once: Measuring the Market Transition from LIBOR
Jonathan Rick – Tradeweb
The dealer-to-dealer market’s switch towards the Secured Overnight Financing Rate (SOFR) this summer galvanized broader acceptance of the new risk-free benchmark in swaps and was a watershed moment for building liquidity. Where regulators had struggled before to build momentum in the transition away from LIBOR, the July 26 “SOFR First” initiative accelerated SOFR linear swap trading. In the ensuing months dealers have gained a whole new level of comfort trading SOFR-related instruments with their clients. With today’s switch in the dealer-to-dealer market to SOFR for non-linear derivatives, we wanted to better quantify the market’s progress in SOFR adoption.


HKEX Publishes Consultation Paper On Operational Model For Derivatives Holiday Trading
HKEX to introduce non-HKD denominated futures and options trading and clearing on Hong Kong public holidays (except New Year’s Day)
Proposal supports Hong Kong’s competitive standing as Asia’s premier derivatives trading market
Hong Kong Exchanges and Clearing Limited (HKEX) today (Tuesday) published a Consultation Paper on the proposed operational model for non-Hong Kong Dollar (HKD) denominated futures and options trading and clearing services on Hong Kong public holidays (Derivatives Holiday Trading).

HKEX plans to offer derivatives trading in some products on public holidays
Chad Bray – South China Morning Post
Public holidays will no longer be considered sacrosanct for some brokers in Hong Kong under a new proposal from the operator of the city’s stock exchange.
Hong Kong Exchanges and Clearing (HKEX) has issued a new consultation paper on its plan to offer futures and options trading of non-Hong Kong dollar-denominated products on public holidays in the city, as well as extended trading of these products from a half day to a full day on Christmas Eve, New Year’s Eve and the eve of Lunar New Year. The only exception will be New Year’s Day.

Euronext to cut ties with LCH and move clearing to Italian CCP following merger; Earliest date for derivatives clearing deal to end is 2024 under the 10-year deal signed in 2017, as LCH shrugs off impact of the break-up on its business.
Jonathan Watkins – The Trade
Euronext’s chief executive has outlined plans to break away from using LCH as its clearing house for cash equities and derivatives, the latter which will break a 10-year deal signed between the two parties in 2017. Stephane Boujnah presented the break-up during the pan-European exchange operator’s strategic plans to 2024 where he pointed out that Euronext is now the owner of a multi-asset clearing house – CC&G – following its acquisition of Borsa Italiana, which will now become its CCP of choice for its cash equity, listed derivatives and commodities markets.

SGX welcomes Tiger Brokers as Securities Trading and Clearing Member and Derivatives Trading Member
Singapore Exchange (SGX) today welcomed Tiger Brokers to its securities and derivatives markets as a Trading Member, as well as a Clearing Member and Depository Agent of The Central Depository (Pte) Limited (CDP).
Tiger Brokers is a Nasdaq-listed global online broker that was founded in 2014, providing a one-stop trading platform for customers to trade a wide range of securities across multiple global markets and currencies.


How To Make the Most of Russell 2000 Index Seasonality Through the End Of 2021
Cboe Insights
In partnership with Cboe and FTSE Russell, Russell Rhoads, Head of Research and Consulting at EQDerivatives, is publishing a series of articles about the Russell 2000 Index. In this article, Rhoads analyzes Russell 2000 Index performance and strategies through the end of 2021.
Historically, November and December, are the most bullish pair of months for the U.S. stock market, according to data reaching back to 1989. The most widely followed indices are higher over this two-month period 75% of the time. However, the Russell 2000 Index is the biggest beneficiary of an end-of-year rally, gaining an average of 4.69% over this timeframe, compared to the S&P 500 Index’s average gain of 3.17% over the same period. The chart below shows cumulative Russell 2000 Index performance for November and December over the last 32 years.


Fenics Market Data Expands FX Options (“FXO”) Offering with AI and New Analytics
Fenics Software Limited
Fenics Market Data (“FMD”), a division within BGC Partners, Inc. (Nasdaq: BGCP) (“BGC Partners,” “BGC” or the “Company”), today announced the launch of its latest upgrade to its FXO volatility service, FMD FXO 2.0 (“FXO 2.0”). FXO 2.0 combines machine learning with improved analytics to deliver over 300 currency pairs and 27 precious metal pairs, improving the surfaces with more wing data points and long dated tenors. FMD market spreads now update more dynamically based on liquidity information from BGC Partners’ trading venues and its award-winning broking divisions.


Wall Street Banks Must Disclose Climate Threats by Next Year, OCC Says
Jesse Hamilton – Bloomberg
Regulator sets climate response as a banking priority;l Agency expects U.S. firms to understand their exposures
Wall Street banks should be ready to answer key questions about their exposure to climate change by next year, said Michael Hsu, the acting chief of the Office of the Comptroller of the Currency.

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Pin It on Pinterest

Share This Story