Last Thursday, in “Brace For “VaR Shock” – How The Bank Of Japan May Be About To Unleash A Global Selloff” we explained that the catalyst for the next market crash may be an unexpected one: the Bank of Japan and its clueless, “Peter Panish” head Haruhiko Kuroda. We urge readers to reread the article, because moments ago JPM’s trading desk admitted that the reason for Friday’s selloff was not fears about the Fed, and not the Lael Brainard “hawkish turn” risk, as the “dovish Brainard” Monday gains have been wiped out today, but, drumroll, the Bank of Japan.
This is what JPM’s Adam Crisafulli sent out moments ago:
“the SPX is giving back the entire Mon rally due to ongoing yield anxiety ahead of the 9/21 BOJ meeting. The market never had a Fed problem but it does face a BOJ one and unfortunately clarity on Japanese monetary policy won’t come for another week (the comprehensive assessment is 9/21, the same day as the FOMC decision).”
Just as importantly, because it is carbon-copy of what we said last week, Crisafulli writes that “JGBs are driving sovereign yields at the moment and until the next stage of BOJ policy is known anxiety levels will remain elevated (even though sovereign 10yr yields are pretty flat so far Tues).”
There is little else:
“other than this issue there isn’t much else to talk about and that is another headwind (the death of news is helping yield-driven fears to propagate uncontested). In addition to the focus on yields and multiples, the contours of the US presidential race shifted materially over the weekend and polls due out over the balance of this week and next will prob. reflect that (i.e. polls will prob. tighten further and Clinton’s +3 RCP average may wind up disappearing).”
Except for bonds of course:
sovereign 10yr yields were flat-to-down small earlier this morning but began to squeeze higher in the afternoon as stocks came for sale. Nothing really “happened” to spark the yield rise but the same old worries are playing a role, namely anxiety ahead of the BOJ meeting 9/21. Portugal’s 10yr yields are up ~9bp and in focus ahead of the DBRS 10/21 decision (a d/g from DBRS would render Portuguese bonds ineligible for the ECB APP). In the US Treasury yields are higher across the curve and the curve is steepening (2, 5, 10, and 30yr yields are up 1, 3, 4, and 3.7bp, respectively).
So, to get a sense of what is going on, first read what we wrote last week, and then keep an eye on JGBs (which are closed right now)
… as well as Bunds, where the steepener selloff has been most acute…
…and of course US TSY, where the plungefest is certainly reminiscent of the good old Taper Tantrum VaR shock days.
via http://ift.tt/2cGwhJk Tyler Durden