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“Calm Returns”, Futures Rebound As Yields Drop After Historic Pounding

Global bond yields slid on Friday following Thursday’s epic meltdown as markets returned to firmer footing at the end of a week that saw the biggest decline in the Nasdaq 100 since the pandemic meltdown. Meanwhile, the quant who predicted this week’s meltdown in both bonds and stocks, turned bullish overnight (more in a separate post) a further indication the liquidation may be ending.

US futures found support around 3,800 and have since rebounded, as global markets stabilized after central banks from Asia to Europe moved to calm a panic that had sent US government bond yields to their highest level in a year and triggered a loss of almost $900 billion in the value of the tech-heavy Nasdaq, the biggest since March.

Contracts on the Nasdaq 100 and S&P 500 fluctuated before turning modestly higher. Thursday’s rout in yields which sent the 10Y as high as 1.61% after a catastrophic 7Y auction, has reversed with broad-based buying across the curve, especially after central bankers stepped in with the usual jawboning to convince markets of their commitment to Yield Curve Control (as the alternative is simply unthinkable). The scale of the sell-off prompted Australia’s central bank to launch a surprise bond buying operation to try and staunch the bleeding. The ECB is monitoring the recent surge in government bond borrowing costs but will not try to control the yield curve, ECB chief economist Philip Lane told a Spanish newspaper.

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