Normal. 7bps instaswings in 10Y Treasury yields and 10 point S&P 500 e-mini futures (ES) dips and rips makes perfect sense. In a desperate bid to get back to VWAP and to hold off a fifth day of red closes in the cash S&P 500 (most in two months), equities were ramped up into the green in the last few minutes of the day only to be sold into hard (on heavier volume and larger average trade size) ending the day down 0.02 points at 1341.45. Quite a day as the 10Y auction and FOMC minutes made for a tempest in a teapot close to close (but cardiac arrests for many intraday). HYG (the high-yield bond ETF) was outperforming most of the day and provided the 'target' for the ramp at the end of the day as VXX dumped (thanks to a more-than 1 vol snap lower in VIX - sell that short-dated vol!!!) and TLT was stable. Oil's surge (inventories) accelerated as the USD leaked lower after its post-FOMC spike and Gold/Silver/Copper all pushed higher also. We can only assume that the post-FOMC drop of around 10pts in the S&P 500 was what many investors believe is enough to prompt swift action by the Fed to NEW QE - though between Oil's move and Treasury yields rising post the the auction (and more post FOMC), broad risk assets actually signal a slightly higher ES - though we suspect the utter collapse in cross-asset-class correlations is the signal that coordinated QE hopes are indeed fading and that the algos late-day reaction (rip) to Treasuries will be recalibrated to new reality soon enough. Cash S&P 500 ended up bouncing off its 50DMA and while ES ended the day +1.25pts, VIX dropped a much higher beta 0.75vols to close just below 18% - wth Treasury yields up 1-2bps by the close.
Treasury yields (red) dipped and ripped around the auction. Stocks (blue) were unmoved until the disappointment of the FOMC minutes but as is evident by the green arrow, they resurged into the close to recouple with Gold and Treasuries...
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but cross-asset-class correlation plunged on the day - as systemic QE hopes fade and markets decouple...
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as ES manged to scramble back up into the Green and above VWAP into the close - only to lose it all back again and revert back down to VWAP after cash markets closed...
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But it was HYG that led the way - outperforming credit and equity indices on the day...
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and while Oil remains the big winner still post EU Summit (with Gold/Silver/Copper all aggregated together far below), on the week (and post yesterday's close) it seems the beta of commodities is clear - Oil, Copper, Silver, and Gold...
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Leaving quite a notable dispersion in Treasury yield performance on the week - though all lower in yield still...
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and just after the close - Supervalu suspended its dividend following a big miss and the stock ripped 20% and then crashed - now down over 20% in the after-hours session...
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Charts: Bloomberg and Capital Context
Bonus Chart: VIX over-ran to the downside once again - just as it did on last Friday which ended badly for overly confident...
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