The Week When Everything Else Snapped.

If last week was the week when equities finally “broke”, this was the week when everything else snapped.

For their part, US stocks managed to close the week slightly higher thanks to another squeeze into the close on Friday, but the pedestrian 0.6% move for the full five days belies one of the most harrowing stretches in recent memory.

Wall Street careened from massive gain to massive loss and back again, as coronavirus headlines, an emergency Fed cut, gamma hedging, leftover deleveraging from vol.-targeting funds, and an embedded/synthetic short, collided with an absurdly thin market to create wild gyrations.

Still, by the time the dust settled, equities were essentially flat for the week.

But nothing else was, that’s for sure.

Funding stress is starting to show up and just about the last thing anyone wants to see right now are seizures in the interbank market. FRA/OIS surged in a straight line. That’s not great news.

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“The USD FRA/OIS spread will tell you more about market stress than the next percent or two in the S&P e-mini”, former trader Richard Breslow remarked.

Oil suffered its largest single-day collapse since 2008 on Friday after Saudi Arabia’s risky gamble in Vienna backfired. Russia declined to acquiesce to a massive production cut aimed at stabilizing crude, effectively ending a crucial alliance between Riyadh and Moscow.

In addition to the impact on oil, the geopolitical fallout will have ramifications for Russia’s ongoing role in the Mideast, where Putin supports the Bashar al-Assad regime in Syria, alongside Iran and Hezbollah.

Energy shares in the US plunged – again. They’re sitting at fresh lows since the crisis.

Of course, the big story was bonds. You can read to your heart’s content in our bonds archive, but I wanted to close the book on this historic week in bond land with a few more visuals.

The 14-day RSI on 10-year yields looks like it wants to fall completely off of the monitor and crash through your desk.

This was one of the best weeks in history for TLT. Friday’s 5%+ gain was simply anomalous.

And, of course, it is impossible to overstate the significance of what happened to 30-year yields on Friday. The full story is here and here, but Bloomberg’s Cameron Crise sums it up nicely. “Today’s move lower in 30-year Treasury yields is the biggest since November 2008”, he wrote, adding that “before that, you have to go back to the ’87 crash to see a move that big [and] in neither case was the starting point 1.54%”. That latter bit is obviously key.

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Tony Farren at Mischler Financial Group told Bloomberg on Friday that the bond rally “has gone way beyond our wildest expectations”.

“I thought last Friday was the blow-off top and then a few times this week before today but now it’s beyond belief”, he marveled.

And yet, through it all, maybe it’s not falling bond yields we should be paying attention to. Or at least not according to “Bond King” for the post-Gross world (and self-described defender of “truth”) Jeff Gundlach.

“‘Yields plunging’ headlines abound. Some yields are. But some are going the other way!”, he shouted into the digital void on Friday evening.

Jeff continued: “And it’s the ones going the other way that matter! Does it matter if Fed Funds are at 0.0 or 0.5? No! Does it matter if credit gets downgraded and junk borrowers default? Yes!”

Read more: One Bank’s Warning As Credit Cracks: ‘The Black Swan Is A Liquidity Crisis’