Risk-On Vs. Liquidity Squeeze

S&P 500 jubilation continued yesterday, and markets didn‘t really notice Fed‘s Williams throwing cold water on giving up the fight against inflation prematurely. The excessive moves in USD retreat well below 111.50 throughout yesterday, and plunge in Treasury yields combined with very risk-on posture in junk corporate bonds, provided daily continuation of Monday‘s momentum (the bear trap having characteristics of a short squeeze), with real assets beyond oil amplifying the growing risk appetite. At the same time though, VIX didn‘t sharply retreat – 29 is not plunge target to speak of, which demonstrates to some degree a fragile nature of this two day upswing. Remember the title of yesterday‘s article (Fed Turn That Wasn‘t) and the caution in evaluation of the upswing prospects I called for back then:

Image and article originally from www.barchart.com. Read the original article here.