Bond markets have several new friends so far in 2014 apart from the soft employment data at the beginning of the month.  One of the most reliable friends has been the stock market in that falling equities have coincided with falling bond yields fairly regularly.  But this isn't simply about equities.

I touched on this in yesterday's recap in discussing the correlation to the Eurozone panic of mid-2012.  It was all about "risk-on vs risk-off."  Yesterday, more than any session so far in 2014, smacked of a good, old-fashioned "risk-off" trade.  Money flew out of equities, emerging-market currencies and the like, and wasted no time landing in the safe-haven assets like US Treasuries and Japanese Yen.  Here's a chart of S&P, Treasuries and Yen (in Red, lower is stronger):

As is typically the case when there's an urgent move into safe-havens, MBS underperformed Treasuries.  To whatever extent we continue to see safe-haven demand, that will likely continue to be the case.

Today's session is very important because it will put these friendships (from interrelated risk assets) to the test.  My default assessment has been that the upcoming FOMC Announcement would keep sharper moves more contained.  Yesterday's break below 2.82 in 10yr yields suggests that may not be the only game in town.