Why The Sudden Surge In Fixed Income Vol May Have Serious Consequences For The Market

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

I guess I could try and analyze all the noise on Greece.  What the Greek ministers are saying about asset sales.  What the IMF is saying.  What the EU is saying.  What the ECB is saying.  What private lenders are saying?  So many moving pieces.  So much fluff to sort through.  So much that has been said and done before that hasn't worked.  New terms for default, etc.   In the end, all that I can think of is "All the king's horses, and all the king's men, couldn't put Humpty Dumpty together again".  Maybe that is far too simplistic, but it no longer seems to me that anything can be done with Greece.

Can the rest of the market be saved? It seems so.  The ECB and China seem to have the will to save the rest or at least scare the market into believing they can.  The volatility is becoming at least a little scary.  The S&P is back to moving 1% or more daily, and sometimes travelling a much longer distance.  S&P futures have already moved about 3% already today - down 1.5% followed by a 1.5% bounce and the NYSE isn't even open yet.  The credit markets are hitting air pockets.  It looks like SOVX completely broke down for periods of time yesterday where bid/offer widened, and in spite of that, the index moved on no trades.  For a brief period this morning, that looked like it affected MAIN as well.  So far U.S. credit markets have been far more stable and the technicals seem better, though I'm not sure how true that would have been if people were trading IG when Main went to 127 bid earlier.  Main is back to 120.  That is a very large swing. 

This heightened volatility needs to subside soon, or we will see weakness in the market as investors (particularly hedge funds) are forced to shrink their positions because they do not (cannot) tolerate the P&L volatility from these sorts of moves.   Main traded in a 10 bp range (95.75 to 105.75) from March 20th until June 8th.  Almost 3 months and the entire range was 10 bps, and most of the time it traded in a tighter band.  Today it has traded in a 7 bp range.  That level of volatility is unsustainable, but even if we continue at the pace of the past couple of weeks, investors will have to scale back their positions as the only way to manage their P&L.  We may continue the bounce, but without real evidence of some new plan, I think the upside is credit is very limited short term.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SheepDog-One's picture

Everyone stop thinking so much and just eat your peas.

coppertop's picture

but you look like Alexandre Vinakuriov

LoneStarHog's picture

Tell Obummer that I will "eat my peas" when his bankster friends eat the SHIT STEW that they created...and...when he and his fat-ass wife start serving hamburger at their lavish White House dinner parties.

Franken_Stein's picture


You forgot to mention the criminal Bush family who orchestrated the 9/11 false-flag attacks, that became the justification for the phony "war on terror", a war that can never be won, because you can never define a winner, but it costs the U.S. taxpayer a ton of money going directly into the pockets of the defense companies.


LoneStarHog's picture

We were discussing Obummer's "peas" ... The DRY-DRUNK JESUS FREAK is another matter.....

SheepDog-One's picture

Right, and dont forget Obama false flag Operation Fast n Furious where Eric Holder sold 30,000 automatic weapons to Mexican drug cartels, for the express purpose of blaming the ensuing murders and mayhem on american gun owners.

Oh, no ones heard of that yet? I guess we only know about the 10 year old false flag attacks, not the ones that happened this year.

kridkrid's picture

And what if we haven't seen anything yet? The next one is going to be a doozy.

Bicycle Repairman's picture

Plenty of blame to go around.  Don't make the mistake of defending ANY of these guys or expecting that they'll come to your rescue.

Pegasus Muse's picture

And when you start running short on oil and gold ... and need a distraction .... attack Libya.  Gives those covert ops types something to do to stay busy. 

Janice's picture

No, they can't be saved because they are lying about the amount of debt that they have, just like the good 'ole USA

scratch_and_sniff's picture

More vol on the way perhaps...."France on imminent downgrade rumors".

augie's picture

Manipulation abounds. How's the VIX doing? lol. 

youngman's picture

What is crazy is that Italian Banks are now positive after being down 6%.....and they sold 1 year bonds...crazy..this world is crazy...Greece..Portugal..Italy..Spain....China...and the USA...so much debt.....how does it end.....I have 100% into gold and silver now....I quit..

fuu's picture

It ends when people are willing to live with less. The banksters weapon is the system will collapse and we will all have nothing. That is the fear they use.


In the end freedom's just another word for nothing left to lose. When people get around to understanding they don't need all that plastic shit in their house and stop trying to attain it the banksters weapon will be useless. They can sit their and crash it all they want.

We really don't need them until we try and overextend ourselves. Then there they are with their loans, their helocs, their credit cards, and all the other ways they have to help people live outside their means. All at interest, all designed to make you poorer trying to be richer quicker.


augie's picture


Me and bobby McGee agree. 

kridkrid's picture

All good issues for our post collapse restart.

youngman's picture

"people are willing "......

This is the key ..willing.....as of right now..all I see are people screaming for more more more....Minnesota..Wisconsin...strike..strike..strike...I think we will need a collapse....to where survival is the main sconcern..then they will be willing to live with less...anything in fact

kridkrid's picture

Great depression 2.0 and World War 3.0. Plan accordingly.

PaperBear's picture

instability, bitchez.

RobotTrader's picture

Huge volume = Maniacal buying of "Paper" vs. "Things"

Last 3 days saw one of the fastest plunges in the 5-yr. yield in history, as the first whiff of trouble in the credit markets cause investors to flee commodities and pile into Uncle Gorilla paper.

2.89% in the 10-yr. is simply insane, but that's because the thirst and lust for paper has never been greater.

SheepDog-One's picture

Gold all time high *huuuurrrrl*

the grateful unemployed's picture

Those recent auction results are incredible. TIPS going at 2-4 oints above par, negative yiels, and the nothing out on the curve as far as the eye can see. How else can you explain this? But Japanese yields were negative for a time. We must be heading for a deflationary event of some kind.

The Axe's picture

Its like a super ball ponzi scheme....GNP revisions, europe falling apart, China throwing its money in the Euro trash bin, no debt deal in the US.....market up...ha ha ha

SheepDog-One's picture

'Market up' to about where we've been for the last 5 months.

ZeroPower's picture

Yes was watching MAIN and SOVX this morning as well... was all going to shit but so were comms, FX risk, and ES. So no surprise there.

As for

It looks like SOVX completely broke down for periods of time yesterday where bid/offer widened, and in spite of that, the index moved on no trades.



The b/a doesnt move on trades (..though it can) but on levels from dealers making that market. Whats your point?

augie's picture

My sentiments exactly. 

SheepDog-One's picture

DOW at 12,500, about avg for the last 5 months. *yawn*

baby_BLYTHE's picture

Ron Paul calls Federal Reserve's ownership of 1.6 trillion in US debt "fictitious" and must be cancelled out.

He knows this will bankrupt Bernanke and his Rothschild & Warburg masters.

Fox Business 07/11/11


Sudden Debt's picture

 So much that has been said and done....

You can shorten that sentence and say: So much that has been said.

The Greeks haven't done any austerity whatsoever. The number of governemt employees even went up this year.


jkruffin's picture

Sure looks like this market is about to take a huge dump!!!!!!!!

spartan117's picture


Who's buying the $60 billion in Treasury auctions this week?

youngman's picture

Exactly...who???? If we knew or could find out....we could invest in this market....

They will sell....how I do not know..but it will be a headline of how big the bid to cover was...IMHO

eddiebe's picture

Ultimately all these gyrations are leading to a confidence crisis in not only sovereign bonds but the currencies they are valued in. In placing our bets we need to keep in mind what is and what isn't valuable to not only the hedgies and bankers, but to the great masses of people. My bets are with the likes of Jim Rogers.
Gold, Silver, Food, Energy and yes, select stocks.

Madcow's picture


jkruffin's picture

Yep, the global terd is about to collapse.....and it is about time!!!!!!!!!!!!

eddiebe's picture

mad cow, how do you see hyper deflation playing out? As the air comes out of the various asset bubbles where do you see it going?

Threeggg's picture

Soros want's to issue "more" paper !

"That means strengthening the euro zone, probably by wider use of Eurobonds and a euro zone deposit insurance scheme,"

he said.