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This Flash Crash Matters – Here’s Why

An indelible mark.

When the yen suddenly surged against damn near everything during one of the more dramatic "flash" events in recent memory just after 9:30 AM in Sydney, it wasn't too difficult to make a list of possible contributors. The yen was already on the front foot amid the generalized risk-off mood across global markets and was tracking the ongoing rally in U.S. Treasurys pretty closely. Well, 10-year U.S. yields dove to a fresh 11-month low following the Apple guidance cut. That probably set the stage. More importantly, though, Japan was out on holiday and the moves unfolded during the fabled "witching hour" during which similar "anomalies" have manifested themselves in the past. Here's one example from January 11, 2016, when the rand suddenly plunged 9%(this isn't the most famous example and indeed, that's why we highlighted it - to remind you that it happens more often than a lot of folks think): (Bloomberg) The moves in the yen were apparently sparked by Japanese retail abandoning the lira and the Aussie - or at least according to most accounts. Algos quickly picked up the moves and once USDJPY plunged through key levels, short covering kicked in, the flow was overwhelming an
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2 comments on “This Flash Crash Matters – Here’s Why

  1. Franceska says:

    There is one flash crash nobody talks about: the General Collateral rate for UST collateral on December 31 was 5.15%, 290 bps above RRP, the reverse repurchase agreement rate. Yesterday another spike occurred again.
    There is something wrong somewhere, better to pay attention carefully.

  2. Mg says:

    Can you elaborate further about what this means and it’s ramifications, for for instance for treasury market bond ratings/stability’s? Thanks.

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