The Federal Reserve (Fed) held rates on October 28 and the bond market calmed. At the same time, Global liquidity fell for a third straight week, with the base under it shrinking. This is one of our inhouse rules to call a top in risk-assets. By our own rule, the top is in.
For two months, global liquidity held near its record while central-bank money and top-grade collateral under it shrank. In a quiet bond market, lenders stretch more credit over less collateral. For the past five weeks, the MOVE index (the Merrill Lynch Option Volatility Estimate), the price of insurance against swings in U.S. Treasuries, closed above its long-run average.
After the Fed’s hold, the MOVE fell under its long-run average almost at an instant. But Global Liquidity appears to have topped, and calmer bonds can’t call it back. The base under the multiplier is still shrinking, and the money the Fed itself supplies doesn’t ignite another bull run. The MOVE supports risk assets only if it holds under its long-run average through this week’s European and Japanese rate decisions and the midterms, and Howell’s next tables show the collateral multiplier unimpressed by recent bond stress.
Less money at an elevated price finds the weakest borrowers first. The extra yield on America’s junk bonds hit a 17-month high. The money that fled ran to Treasuries, and pulled the thirty-year yield down to 5.30% on October 27, from a 5.63% weekly close at the start of the month. The weakest borrowers got the bill, and the safest one got the money.
Gold should have loved that. Real yields fell too, and falling real yields usually lifts an asset that pays no interest. Gold broke anyway. It closed the week to October 25 at $3,991.90, its first weekly close under $4,000 since October 2025. Three things knocked out the floor at once, and one of them came from Beijing. Read about China’s impact on the gold price in the article below.
Crude held on to its war premium. U.S. crude closed the week at $102.19, its fifteenth straight weekly close above a 100-week average that is itself still rising, and that fires our oil stress test. On Tuesday, The Wall Street Journal reported that Washington told Gulf nations to prepare for a short, intense campaign against Iran. President Trump hasn’t decided, and leans toward a large attack after the November 3 midterms.
Stocks are the last guests still at the party. The S&P 500 closed October 27 just 1.23% under its record. But its 20- and 50-day averages have rolled over. Its 100- and 200-day averages still rise.
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Our team splits on whether the turn in liquidity has reached stocks yet, and our crypto shorts ride on the answer. Priya Sandoval reads a market still finding money, and October’s events as a crowded trade clearing out. Julian Harlow reads the one support that held liquidity at record levels leaving. Theodore Brennan reads an upcoming repricing where it usually starts, in credit. The week moved the evidence toward Harlow and Brennan, and two tests in today’s article settle it. The weight of shrinking global liquidity will be felt through markets from early November. That window opens next week. Will the Fed win or the markets? Our team members weigh in in today’s Macro Tape below.
Our book is short Bitcoin, Ether, and Solana. People behind Hayloo may hold any asset discussed here, in either direction. Nothing here is advice to buy or sell.