Global risk markets and US equity futures were drifting lower together (post China trade deficit data) into this morning's confusion in Europe but around 430ET, equities pushed higher, Treasuries rallied rapidly as we approached the US day session open and broadly speaking risk was off (in everything except stocks). Commodities dropped notably with Oil and Silver losing over 1.5% from Friday's close before heading into the US open. The across-the-board weakness in credit and our broad risk asset proxy (CONTEXT) reversed, as if by magic, as the day-session open in the US dawned and led generally by Treasuries, which staged a 4-5bps sell-off from overnight low yields (with 2s10s30s notably rising on 30Y outperformance and 10Y underperformance), we leaked back to unchanged in ES (the e-mini S&P 500 futures contract) having traded in a very narrow range all day on low volumes (across MAR and JUN). VIX made headlines for its low levels but the steepness of the term structure should be a much bigger concern. AUD weakness spurred much of the early risk-off but accelerated stringer into the US close to maintain equities as close to green as possible. A very noisy day given very little news/event risk and the general confusion in European sovereign markets which all leaked wider. Credit and the vol term structure remain notable canaries as it appears EURJPY has become carry trade-of-the-day once again.
Credit and equity resynced into risk-on from the start of the US day session but credit (especially HY) remains notable underperformer post Greece...
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It is worth perhaps noting that HYG ended very marginally in the red while SPY very marginally in the green and 4 of the 5 times this has occurred this year, SPY has underperformed the following day (and we note HYG pulled rapidly up to its VWAP at the close - suggesting some selling pressure).
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Commodities showed some further divergence as Silver lost its luster today relative to the other metals (and WTI)...
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Broadly speaking though the underperformance of Oil and AUDJPY kept CONTEXT weaker while the recovery in EURJPY and sell-off in Treasuries (and 2s10s30s) is what kept the spirit alive in stocks - even though volumes were abysmal...
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Charts: Bloomberg