On a stressful day in the stock market, yield spreads are not reflecting much stress. Here is the state of the 10yr-2yr spread at yesterday’s close. It looked constructive as it was gently rising.

But today, as global markets take a good hit (off some hype out of China* no less), the 2’s are not indicating a rush to short-term liquidity instruments. Quite the contrary. While long-term yields are slightly down (30yr) to slightly up (10yr), the 2yr is up significantly more.

This in-day stuff is noisy and has nothing to do with greater trends.  That’s what we write 30 page weekend reports for; to stay on the correct trends and anticipate those that are coming.  But this snapshot is not indicating financial market stress (today at least) that is commensurate with the downside in stock markets.

* And surely, the news about officials allowing shorting of Chinese stocks is not material fundamentally, but is material to knee jerking momos the world over (in the short-term at least).