Feb 9. Panic! at the disco. Victorious….NOT!
Panic time. Is it close to peaking, or can central banks save the day?
Indicators, in no particular order:
–Swap spreads moving higher, 5yr +2.75 to -0.06, 10yr +2 to -6.63
–Treasury yields crashing, tens -11.3 to 173.3 and fives -10.1 to 114.7 (through major yield support)
–Japan ten year hits zero
–Japan stocks -5.4% today, led by financials
–$/yen pounded to 114.25, lowest since 2014
–Global bank shares getting crushed, with DB having to issue a statement to calm the market (a cry for help)
–VIX nearing August levels
–EDH6 heavily sold, closed -2 at 9934. Open int fell in H6 by 78k, M6 -59k, U6 -23k
–Implied vol in interest rates exploding higher, most ED straddles up 3 bps. Example, EDH6 9937^ had been trading 6, settled 9 yesterday. EDM6 9900 put settled 1.25 on Friday, settled 2.0 yesterday with EDM6 +1.0!
–Junk bond etfs making new lows (JNK lowest since mid-2009)
–Barclay’s notes demand for distillates down 18% yoy in January, associated with recession
It all falls on Yellen’s shoulders tomorrow. I hope she doesn’t fall into a Rubio-like repetitive loop (Rubo-loop). The Fed always claims they’re not all that worried about drops in equity prices, until they actually drop. The message will be that the Fed is on hold until stability reappears, and if forced to ease, it will. The message will be that the Fed is on hold….
Does the market believe central banks can ride to the rescue? Gold surged $40 yesterday…suggests healthy skepticism.
