« Today's CPI Report | Main | The Mark of the Bust »

For all the talk about commodities, bear in mind that the most important commodity that's traded in the markets is risk. The thing about risk is that it mysteriously floats around in different market, but it's always there.

Risk isn't so easy to see in the equity market, but it's very obvious in the yield curve. The chart above is a a good example of the effect that the stock market has on the bond market, and vice versa.

In March and April, the long-end of the yield curve was flat. But as the risky stock sectors rallied, the yield started to curve again. Now that money is leaving risky areas of the equity markets, the yield curve is flattening again. The same thing is going on, just expressed in different languages.

Posted by edelfenbein at June 14, 2006 2:47 PM