Global markets are still recovering from yesterday’s wild ride. In general, that has involved gains for stocks and losses in bonds.  It’s also probably worth keeping a periodic eye on dollar/yen (aka USD/JPY) these days considering the Yen carry trade was credited for much of the recent stock losses.  Some say there is more unwinding and deleveraging left to come (leverage is a key ingredient of the carry trade and one that exacerbates volatility amid carry trade corrections).  Others are saying “move along, nothing to see here.”  Based on the fact that USD/JPY has fallen (stronger yen) while stocks have improved, markets may indeed be moving along.

The next chart is a longer term look at the relationship between stocks, bonds, and USD/JPY.  The intent is to show the magnitude of the move in the latter.  Another message in this chart is one we’ve already been following, i.e. that bonds have been trading the shift in economic data over the last 3 months.