There is something of a flight-to-safety trade ongoing in US markets with the S&P 500 now down 1.2% and the Nasdaq off by 2%. Oil, gold and risk-sensitive currencies are also selling off.
You would expect that to lead to some bids in bonds but they aren’t materializing. US 2-year yields are at the highs of the day, up 4.5 bps to 4.08% while 10s are up 4 bps to 4.24% (though down from the high of 4.26%).
There is something of a chicken-and-egg argument here as it’s the bond market that has likely (finally) led to some selling in equities as Fed cuts are priced out.
Backing out, it seems as though there is a ‘sell everything’ mood descending. That makes sense as we’re less than two weeks away from the US election and it’s been a sparkling year in markets. There is also a fear of buying bonds in case there is a red or blue wave, something that’s largely expected to lead to larger deficits.
The market angst is also likely building around tech stocks with Tesla set to report today and most megacap tech stocks next week.