Risk-Parity Panic Looms As Bonds, Stocks, Gold Rally; Reject Fed Hawkish Chatter

The market's message to The Fed...

 

Rate hike hopes from Friday were rapidly unwound today in Fed Funds Futures...

 

Volume for this ramp was a fraction of the volume during Friday's dump...

 

This was the lowest volume day of the year... as low as New Year's Eve....

 

On the day, equities were all higher...

 

But rolled from the Fischer cliff...

 

Note that from Yellen's statement, stocks managed to get green...

 

VIX tested up to 14.5 overnight but was pressured down a 12 handle briefly to get us back to Fischer ledge...

 

AAPL tried to hold it's "announcement" gains but the Irish tax pain weighed on it by the close...

 

Bond and stocks are now fully correlated (rising and falling together on easing/tightening headlines) as opposed to the norm anti-correlated regime...  The last time this happened create havoc among the risk-parity funds.

 

In fact - this is the most correlated US equities and bonds have been since right before the last rate hike... which ended very badly for stocks...

 

Bonds all rallied on the day...led by the long-end... (note 2Y +2bps and 30Y -5bps post Yellen)

 

Collapsing the yield curve to the lowest since Dec 2007... not that financials cared...

 

The USD Index started the day well but as the US equity market opened, selling pressure hit and all the majors rallied systemically against the USD...

 

Despite USD gains, Silver and Gold gained as Crude slid lower (despite a major shut-in in The Gulf due to storms)...

 

Charts: Bloomberg

Bonus Chart: Cross-Asset Class Correlation continues to soar...