Commodity Liquidation Accelerates As Margin Calls Strike

There is a clear and significant sell-off across all risk assets. Equities are leading CONTEXT lower (after converging perfectly pre-Fed) but equities and credit are falling tick for tick for now with HYG (the high yield bond ETF) falling significantly (which remember has been critically important recently). Commodities are where the real action is though for now with Silver now down over 4.5% on the week (and Gold and Copper not far behind). The velocity of the moves suggest the disappointments in other risk assets are leading to forced selling as a dearth of QE-related comment from Ben and the boys has the USD now over 2% stronger on the week legging higher once again as EURUSD is now -220pips from its early morning highs.

Oil is holding up for now - pulling significantly away from USD's strength this week but the gappiness of the moves all week (from late sunday night) in Gold, Silver, and Copper suggests some painful calls are being made.

CONTEXT has been gappy today as the initial spike (thanks to Oil's jump) and drop (thanks to the TSY auction) seemed to act as a magnet as we went into the FOMC call (with ES just in line with VWAP). Since then equities - which remain rich relative to credit markets on a medium-term (where we see value for stocks given current high-yield levels at around 1208 for the S&P 500 cash index) have underperformed CONTEXT as oil remains a modest positive bias and FX carry crosses are stabilizing.

UPDATE: HYG just rallied hard off the lows and disconnected from stocks and credit - it seems they really do need to save that asset-heavy ETF.

Charts: Bloomberg and Capital Context


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