Like A Lion

“March came in like a proverbial lion,” Bloomberg’s Laura Cooper wrote Tuesday.

“Sure, a Chinese regulator’s asset bubble warnings sapped sentiment overnight, but rising yields skimming froth off the rally turns investor focus back to the reopening trade — like last week didn’t happen,” she added.

I’m not sure anybody has forgotten about last week just yet. But it’s certainly true that the dramatic surge on Wall Street to mark the first day of March helped.

Rates are still a point of contention and the subject of intense debate. Fed speakers are lining up and the market wants more. More color on what some argue is incongruous guidance on rates when juxtaposed with the firming economy, more color on the Fed’s thinking when it comes to how they may react to any further backup in long-end yields, and some clarity on SLR.

BofA suggested a new Operation Twist can solve three problems at once. But the bank admitted that “without more severe UST market illiquidity and tighter financial conditions,” such a move isn’t likely in the very near term.

“While the spike in gamma is likely to prove transient, once the positioning is sorted out, risks remain elevated in the medium- to long-run,” Deutsche Bank’s Aleksandar Kocic said. “In particular, the debate about the long-term Fed will persist as the crisis continues to develop and the impact of stimulus on the economy remains unclear.”

In a Tuesday note, Nomura’s Charlie McElligott cited “cleaner positioning after the liquidations and unwinds of last week,” in noting that things were relatively calm in rates as March dawned.

The good news for stocks is that “dealers [are] now ‘long Gamma vs spot’ [with the] Gamma neutral line at 3,790,” McElligott remarked. This means hedging flows will tend to insulate the market from big swings, as opposed to exacerbating directional moves.

The bad news is, we can’t say the same thing for tech. “Duration-sensitive Nasdaq/QQQ, however, continues to sit at the root of much of the market ‘jumpiness,’ [and] as opposed to SPX/SPY options positioning, Dealers remain incrementally ‘short Gamma vs spot’,” McElligott added.

Tech, and secular growth more generally, will remain vulnerable to additional bearish pressure in global bonds and/or to any further re-pricing of the Fed.

Apropos, Cathie Wood made a comeback Monday amid tech’s rebound. The ARK Innovation ETF rose nearly 5%. The product, which suffered big outflows during last week’s bond tantrum, raked in $464 million in a single day Friday, on apparent dip-buying.

That was (almost) a record.