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Risk Returns with a Vengeance

May 25th, 2010 Michael McDonough

After stabilizing from 5/20 to 5/24 AUDJPY’s decline has returned with a vengeance falling to 72.88 from 74.63 a day prior.  The currency pairs stability over the last few days led some to believe the market could be approaching a bottom.  Other notable risk indicators moving this morning include the TED spread, now up to 38.6bps (from 18.6 at the beginning of the month), and US breakeven rates.   1Y breakeven rates fell below zero this morning, with rates on the long end of the curve beginning to see more significant declines.    Investors in Europe continue to flock to the safety of Germany with German 10Y yields reaching a record low 2.56%.  Other than a quick peaceful resolution to the geopolitical risks building in the Korean peninsula, there doesn’t appear to be any near-term positive catalysts in the pipeline to shift investors sentiment.    

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