The Daily Shot 9.12.16

By SoberLook


Let’s begin with Friday’s markets where the volatility has finally returned. A confluence of events including the ECB’s inaction, some of the Fed officials’ hawkish comments, Jeffrey Gundlach turning bearish on bonds and technical factors sent markets into a sharp correction. Machine-driven activity accelerated the selloff. The equity markets were particularly spooked by the sharp correction in global bonds.

1. The Treasury curve steepened as longer-dated yields jumped.

2. The situation was even more severe for Europe. French and Italian 30y government bond yields are shown below.


3. Bunds had a rough couple of days following the ECB’s decision to stay pat.


Source: McElligott (RBC)

4. Similar to the moves in the Eurozone, the 30yr gilts yield was up 12.5bp (3.6% drop in price).

1. In the equity markets, the S&P500 futures closed 2.6% lower on the day. Some had been pointing to the “triple top” technical formation.

The  selloff continues in the early Monday morning hours.


2. Citi has recently pointed out that global equity markets are increasingly macro-driven, and Friday’s events made that quite clear.

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