Yahoo Finance markets reporter Jared Blikre breaks down the morning bond market action on final trading day of May.
Video Transcript
BRAD SMITH: Let's get to Yahoo Finances. Jared Blikre on the floor of the New York Stock Exchange. Jared, what's good?
JARED BLIKRE: Well-- well, that's a loaded question. I'll tell you what. We're seeing a little bit of green. But guess what? A lot of that is just centered in tech, and that really has been the story. And I just want to direct everybody's attention to the YFi Interactive. Here we got the Dow. But I'm taking a look at the bond market now. The 10-year T-note yield, which had been accelerating in May, is getting a little bit of a reprieve. And we'll see if I can pull this up here. Over the last two days. And so, this actually favors the growth trade, which already seemingly had been in favor of the growth trade. And that would be long duration in those tech stocks.
Now, whatever happens with the debt ceiling-- and let's say this is resolved in the best possible manner-- we're still going to have the Treasury refilling its coffers over the coming months. And that assumes everything runs perfectly in between. And then, we have a tightening in terms of, basically, QT in Europe as well. So we don't even have a handle on the exact figures, but it's something like half a trillion to $1 trillion. We're going to lose in liquidity this year.
So another thing I'm really watching like a hawk is the ICE BOFA MOVE index. You can see that's on the Wi-Fi interactive right here. Over the last two days, you can see these two green candles here really picking up here. And when we have bond market volatility, guess what? That usually spills into equity volatility, currency volatility. Everything is related, so definitely get some cross-pollinization of risk. And if it starts in the bond market, eventually, it's going to hit equities as well.
Now, I also want to say one more thing. This is about seasonality that we have in the month of June. June, as it turns out, not the greatest-- hasn't been the greatest trait on average over the last 20 years. And here is a chart. This is the seasonality of what the market typically does. And the first thing you notice, yes, it is from the lower left to the upper right for the most part. But that red box right there, that is June. And guess what? Usually there is a bit of a loss in June. And for that matter, there is May as well, which you don't really expect too much from.
And it gets back to that old adage that I really don't like to say. But it's out there. So sell in May and go away. Guess what? It's really more like hedge in May and go away. Lots of large institutions prefer to be on autopilot over the summer. They don't want to be in here. They don't want to be down in the nitty gritty. Now, that would change if there's some huge paradigm shift in information. And we've seen this in years past where institutions are forced come in over the weekend and kind of hammer out some business. But that is not the norm.
For the most part, nobody wants to reposition. And for that matter, given all the low liquidity that I was just talking about, there's not a lot of high liquidity days in the market that they could actually do that without causing a commotion. One is going to be the Russell rebalance. That's coming up in a couple of weeks. After that, really got nothing until the fall. So it's kind of where we are right now. In limbo.
JULIE HYMAN: In limbo. Don't we love that? Thanks so much, Jared. Appreciate it.
