Volatility Surges on Cheaper Oil and Bank Capitalization Fears

Global stocks plunged while Treasuries and swaps rallied across the curve off the back of continued global growth concerns.  The massive flight-to-quality trade was largely driven by falling oil prices (WTI crude below $27) and weakening credit markets, which are causing investors to question the effectiveness of central bank policies.  Poor European bank earnings and weak forward guidance dragged down financial stocks on both sides of the pond, which have now surpassed energy companies as the biggest source of pain for equity markets in recent days.  At one point the 10-year Treasury hit 1.53%, its lowest level since August 2012, before bouncing higher.  10-year notes are currently trading at 1.63, down 4 bps from yesterday’s close.