Business

In what was the clearest sign to date that the Fed is targeting the stock market bubble with its rate hikes (recall two weeks ago Goldman caused a stir when it suggested that the Fed had made a policy error by being overly dovish with its rate hike, which instead of tightening financial conditions, had the effect of a 25bps rate cut), today not one but two Fed presidents warned that the market is getting "a little rich", that "valuations may be a little frothy", and that the record "wealth to income ratio is a reason to keep raising

The S&P 500 Index and CBOE Volatility Index have historically moved in opposite directions about 80 percent of the time, but that’s changed recently...

As Bloomberg reports, both gauges are heading for declines this month, after the two rose in tandem in February.

That’s weakened their inverse correlation, sending it to levels not seen since April 2005...

After March/April 2005, the S&P 500 dropped around 8% (breaking down as the correlation reverted to norm)

Having become a habitual response among the investing community, with sellside research reports dedicated to the phenomenon of buying the dip which no matter what the Fed does, refuses to go away...

...  it will probably not come as a surprise that as Bank of America writes in its latest weekly client flow trend report, following last Tuesday's sharp selloff in stocks, "hedge funds & retail bought the dip", in the words of the bank.

Following two medicore auction earlier in the week, moments ago the Treasury concluded the week's issuance of paper with a strong sale of $28 billion in 7 Year Notes, which priced at a yield of 2.215%, (with a 19.2% allocation at the high yield), stopping through the When Issued of 2.219% by 0.4% bps, likely aided by this morning's ECB news as well as a reduction in corporate issuance leading to less rate locks, which in turn offset the lack of a short interest heading into today's auction where the repo rate on 7Y paper was a comfortable +0.30%.

With Brexit officially a go, banks in Britain are scrambling to undo months of verbal damage, and reassure their London employees over possible Brexit disruptions, a potential shift in jobs to continental Europe, and also talking down warnings made in recent months about leaving the City, some in now dashed hopes of getting a Brexit revote.