Stocks got a bump late in the day after the US Treasury announced it would borrow $55 billion less than projected last quarter.
It now expects to borrow just $760 billion in privately held net marketable debt, assuming an end-of-March cash balance of $750 billion. Meanwhile, the Treasury also noted it would need to borrow $202 billion in the April to June quarter.
This led to the 10-year rate falling an additional 2 bps on the day. They had already been down four bps before the announcement and finished the day lower by six bps.
This also helped to take away some of the day’s gains in the dollar. The dollar has still been unable to get above the 103.50 region of resistance.
At least for now, the momentum still appears bullish, but it can still look as bullish as it wants; it doesn’t mean anything until the DXY gets through the 103.5 level of resistance.
The VIX was also higher yesterday, which isn’t unusual for a Monday. It was unusual that the VIX didn’t give back all of its gains throughout the day.
It is never strange to wake up on a Monday to see the VIX green.
Typically, though, that results in volatility selling all day, helping to push stock prices higher. What isn’t typical is to see the VIX green all on a Monday, for volatility selling not to show and the S&P 500 rally anyway.
What was also odd was that the implied correlation indexes for the 1,9 and 12 months moved higher, while the 3-month index was flat. Typically, you don’t see the S&P 500 rally with these indexes moving higher.
At least based on several factors, if I had known all of the above, I don’t think I would have guessed that the S&P 500 rose by 75 bps on the day. I would have figured flat to down.
The rest of this week seems less clear, given a slew of economic data points, earnings reports, the Fed, and how the Treasury intends to issue all of this net debt.
Things could get more interesting today.