Hi YXI friends,

Tuesday read like an FX-led de-risking driven by a sharp JPY move. Investors reduced their long-duration equity and crypto positions and instead bid into US Treasuries.

There was also a defensive breadth rotation under the surface, as the equal-weight S&P 500 index rose while the market-cap-weighted index fell.

The good news is that our “crash monitoring” variables, such as credit and funding stress, do not indicate an imminent collapse. From here, we remain in a consolidation mode unless we see a sustained move higher in USDJPY and a retreat in oil prices.

Nonfarm payrolls today are projected to add 66k jobs, with the unemployment rate unchanged.

Due to the winter storm and the temporary government shutdown, today’s print will likely be entirely unreliable. Therefore, sharp moves on both the upside and downside surprises should be faded.

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