zerohedge.com / by Tyler Durden / Sep 12, 2016 11:26 AM
On Friday, RBC’s Charlie McElligott sent out a great summary of how “Markets Are Paralyzed With Uncertainty” as the “Spook Story” of spiking yield curves appears to have arrived seemingly out of nowhere, bringing with it the fear that an inflationary impulse may finally be coming, leading to the worst S&P selloff since Brexit.
Today, he provides a just a useful “big picture” update on a market that has been VaR shocked, and is urgenly waiting for more information from the aforementioned Lael Brainard speech due just after 1pm Eastern. As he puts it, “the standard (and now at least semi-annual) VaR-shock episode kinda / sorta continues, as mechanical deleveraging from the systematic quant community continues in equities and fixed-income markets, largely off of the recent reversal in the long –end of global rates and their curves—thus, we’re simply experiencing a re-positioning shift.”
The RBC strategist further notes that, as expected, “a few diff open-end risk-parity strategies I watch saw 3SD moves Friday, which is totally reasonable considering their holdings and leverage (one particular risk-parity fund’s holding list is a “who’s who” of beatdowns: long US 10Y note, Gilt fut, midterm euro-OAT, S&P eminis, gold futs, jpn 10y bond, euro-BTP future, Euro-Bund buture, Aust 10Y bond fut. Look at the comedy below which is the panic exodus from you EU fixed-income proxy mega-long, German Bund future.”
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