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10Y dollar tax reform

Market Gods Are Angry: Bulls Hit By Tax Cut Delay, Junk Bond Drama, Nikkei Jitters (Full Text Of Amended GOP Bill)

Well, if you're in risk assets - or short vol. - you probably feel like the world is conspiring against you on Thursday.

Well, if you’re in risk assets – or short vol. – you probably feel like the world is conspiring against you on Thursday.

And if that’s you well then on behalf of the bears and the long vol. crowd, allow us to ask you the following: “how’s it feel motherfucker?”

You’ve got three things working against you:

  1. a harrowing decline in the previously invincible Nikkei overnight which was mercifully bid back to basically flat by the close, but which nevertheless shook confidenceNikkei
  2. an unfolding junk bond debacle which you can visualize any number of ways, the simplest of which is just to note that mom-and-pop high yield has fallen for seven consecutive sessions and is now below its 200-day MAJNK
  3. and now trouble on the tax front

Obviously, the headline that’s moving things around intraday is the delay on the corporate tax cut.

Once WaPo reported the proposal (which would differ from the immediate cut called for in the House legislation and is certainly not what Donald Trump prefers), things went to pieces. Sen. Bill Cassidy confirmed that the Committee’s legislation proposal includes a one-year delay although GOP Sen. Roger Wicker would counter that the corporate rate cut could still take effect immediately. “I think that’s certainly a real possibility,” he claimed.

Whatever the case, this is shaping up to be a rough day. Here’s the reaction in USDJPY and ES:

StocksFX

Same risk-off sentiment in yields and the VIX (although some algo apparently made a mistake based on that initial spike lower in vol.):

Taxes2

The market gods are against you today, and it’s going to take a pretty notable reversal of sentiment this afternoon to turn things around.

Do note that the headlines on taxes are far from coherent. The messaging is mixed, the information conflicting. Here are a couple of the more bullish headlines:

  • CORNYN: GOP `WORKING ON’ HOW TO MAKE CORP. RATE CUT IMMEDIATE
  • SENATE BILL WOULD MAKE FULL BUSINESS EXPENSING PERMANENT:ROUNDS
  • SENATE TAX BILL LIKELY TO KEEP MORT. DEDUCTION AT $1M: SCOTT

And indeed that’s part and parcel of the problem. No one knows what’s going on and that kind of uncertainly has a tendency to be the straw that breaks the camel’s back on days when there are already issues.

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Here’s the text of the amendment from Brady

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4 comments on “Market Gods Are Angry: Bulls Hit By Tax Cut Delay, Junk Bond Drama, Nikkei Jitters (Full Text Of Amended GOP Bill)

  1. PaulMiller

    The VIX spiked to 11. Eleven!
    OMG

    I’m getting shorter vol on the spike

  2. Loving it. In the words of Oliver Twist, “please, Sir, can I have some…..more?”.

  3. PaulMiller

    Market gods are chillin’ this afternoon, planning a vacation in the next 6 months.

  4. The bond vigilantes are stirring and may be getting ready to get rambunctious. Stay very nimble.

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