Treasuries appear to be shrugging off the Taper talk in favor of safe-haven status as they rally 6-7bps - the best yield compression since mid-February. US equity markets did not close off the lows (as the Nikkei is within 45 points of the dreaded bear market 20% correction level). Credit markets anxiety yesterday bled through today and they led stocks lower (with no Hindenburg Omen today). The VIX term structure bear-flattened dramatically as the 'picking-up-nickels-in-front-of-the-steamroller' trade finally got its fingers caught - the front-end of the curve smashed higher and is now at its flattest to the midcurve in 2013. The USD weakened as JPY was bid (and AUD sold hard) amid heavy carry unwinds. Volume was heavy today but the selling was very broad-based across the sectors (homebuilders remain worst on the week). The Dow ended with its biggest points drop in almost two months - no buy-the-dip-mentality victory today eh Maria?
No matter how hard they trued to pick up JPY and get back to VWAP - the algos couldn't trump the selling pressure...
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From Friday morning's top, things are accelerating...
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with homebuilders leading the way...
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Credit led the way after yesterday's huge range day...
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and VIX pushed up near its year's highs and its flattest term structure...
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Why do we care so much about FX? Because it's all about the JPY carry trade - as it seems a few mainstream media types are finally catching on to...
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Charts: Bloomberg and Capital Context