Another day, another 4% intraday move. Stocks rallied briefly on headlines of progress in tariff negotiations—whatever that means in April 2025. But just before 1pm, the party ended. The 3Y Treasury auction landed with a dull thud, sporting a 2.4bp tail—the worst since COVID-era dysfunction. And just like that, the S&P did a reverse victory lap, closing below 5,000 at 4,982.
Treasuries: From Safe Haven to Hot Potato
The story of the day wasn’t just equities—it was the bond market throwing a tantrum. The 3Y auction showed foreigners (indirect bidders) were still present, but the so-called smart domestic money (directs: pensions, hedge funds, mutual funds) said “pass.”
The 10Y yield surged over 30bps in two days, now hovering at 4.30%. Swap spreads? Negative and getting more so—raising eyebrows and swap market newsletters alike. When Treasuries yield more than SOFR swaps, someone’s balance sheet could be screaming. Repo tightening? Liquidity stress? Maybe. Maybe it’s just Tuesday.
As we’ve seen before—COVID, the 2019 repo spike, even the UK’s LDI wobble—sometimes you don’t know what broke until after it’s already broke. We’re not there yet, but we’re in the narrative-building prelude.
Ahead of today’s 10Y Treasury Auction, 10Y yield is 4.30%, the 2Y is 3.73%.
Batteries vs. Bricks
Elon, never one to resist a Twitter (fine, X) flare-up, labeled Peter Navarro “dumber than a sack of bricks” after Navarro referred to Tesla as a mere “car assembler.”
Polymarket odds of Navarro getting fired this month? 11%. Odds of investors regretting buying the recent dip? Higher?
Midnight Tariff Madness
The new tariffs kick in at midnight, and everyone from CNBC to the meme economy is covering the scramble. Apple reportedly chartered entire fleets of cargo planes to move 6 months’ worth of iPhones from Asia into the U.S. before the curtain falls.
What happens next is anyone’s guess. Post-tariff iPhone prices may finally justify that $1,299 screen repair.
If only the memes of Americans working at factories could be taxed to pay for tariffs.
Too Many Moving Parts, Not Enough Patience
We’re seeing a cocktail of chaos: Treasury indigestion, equity volatility, rising yields, tariff fear, and echoes of leverage-induced panic. And while pundits scramble to assign blame, it’s worth remembering what this blog has said before: patience isn’t just a virtue—it might be the edge.
Patience is the forbearance of what one suffers—the willingness to let things mature, to not rush just because the market is.
In Enough, John Bogle opened each chapter with a reminder: “Too Much…, Not Enough.” He’d likely remind investors there are no black swans in the stock market over the long run—only the efficient (if bumpy) compounding of capital by real businesses.
When tempted to run with the herd, Bogle’s advice was simple, and good:
"Don't just do something. Stand there."
XTODs:
XTOD: Breaking: Sources close to the Trump White House say they are pressing on with their tariff plan based on this calculation: That the tumult in on Wall Street in stock market, while significant, will not be matched by a similar tumult in the Main Street economy. That the negative wealth effect primarily targets non MAGA affluent voters; that jobs will be largely retained because of deregulation and tax relief. And soon trade deals will be cut that lessens the tariff impact, so markets will stabilize. Bottom line: They believe that politically they will be just fine and at least for now they’re pressing on. I’m not saying I agree with this; in fact it’s a gamble IMHO and who knows maybe they do a 180. But that’s the thinking as we reach tariff judgment day and markets continue to rattle.
XTOD: The bond selloff is all China. I would bet my left nut.
XTOD: Lots of rumors (best I can tell without strong supporting evidence) of China selling the 10y (and more implausibly, the 30y). A few observations.
XTOD: "My strong, unwavering belief is that Pax Americana is a damn good deal for the United States AND the world" Somebody's been reading their Kindleberger!
XTOD: American Oil: a $57 handle.
https://x.com/TripleNetInvest/status/1909728248294166684
https://x.com/dailydirtnap/status/1909723908195987799
https://x.com/Brad_Setser/status/1909740555837522318
https://x.com/PMehrling/status/1909703475199369566
https://x.com/tomkeene/status/1909769301357195587
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