Real money is flooding into the front-end of the curve after retail sales with 5-year yields down 12 basis points to 1.32%. The 10-year is down to 2.09%, despite Gundlach calling the bottom (in yields) yesterday.
The rally in the short end is a pure fear trade but it’s also signalling that the Fed won’t hike. In the FX market it’s clearest in USD/JPY.
The pair knocked out the 38.2% retracement of the July-Sept rally and crushed through 106.50. There isn’t much in the way of support until the 100-dma at 105.74 and the 50% retracement.
USDJPY daily chart
