Original Article Here:
Year-to-date, Gold is up an impressive 9.4%, significantly outpacing the S&P 500 at +5.6% and the disappointing 2% loss (in price) for the 30Y bond.
Treasuries sold back off initial knee-jerk rally low yields into the close but the EUR kept going (holding above 1.3100) as Gold and Silver were the big winners on the day (+2.9% and 3.4% on the week now). Stocks and credit roared higher after an initial stumble post FOMC. Financials lagged among all the S&P sectors (and Utilities outperformed post FOMC statement +0.75% vs financials -0.25%). Right up until the close, credit and equity markets were on a tear but very soon after cash closed, futures limped back and HY credit snapped lower (quite dramatically) which makes some sense given just how ridiculously rich it had become to fair-value.
Gold handily outperforming this year.
After HYG signaled an early turn lower in credit and equities, the FOMC statement sent risk on a rip which didn't want to stop until it had taken out recent highs. Average trade size increased significantly once we got over recent swing highs and as is clear we leaked back into the close with quite a significant drop in HY as cash markets closed. The suspicion would be that CDS index levels were just being reracked by market-makers instead of heavy flow driving it up and then some real orders hit as we rolled over and the market hit a small void. We note that IG and HY are now at almost record levels of richness to their intrinsic value (and the 3s5s curves continue to flatten - bearishly in our view).
Commodities, as one might expect, enjoyed the limelight in what was on first glance a disappointing statement lacking any QE-specific expectations and ZIRP moves (it didn't seem that surprising to us). But the squeeze was obviously on in stocks and the reality that the only way the Fed has left to combat the ills of reality is to print drove Gold up to six-week highs over $1710.
Treasuries ripped and then dipped with 30Y ending up back near its high yields and the rest of the curve well off its low yields by the close.
Broadly speaking risk assets moved in a supportive manner for stocks (as is clear from the capital structure - left, and
CONTEXT - right).
Charts: Bloomberg and Capital Context
