Just over a week ago, the probability of a September ‘Taper’ were a mere 14% with the majority of the ‘smart’ money betting on a ‘December 2013 at the earliest’ start to the Fed’s removal of the punchbowl. September 2013 is now the front-runner at a 36% probability, based onPaddyPower’s latest odds. September has surgede from a 7/1 outsider to a 7/4 favorite in that brief time (and October also improved from 11/1 to 7/1). It seems that JPY-carry is well aware of this shift (having surged over 4% in the same period). Between Merkel’s election and the FOMC, the 3rd week of September (which just happens to perfectly correspond to an option expiration) looks set for some fireworks one way or another.

While bonds may well have repriced for this slowing of liquidity delivery, and credit and FX moves signal an awareness that a disturbance in the force is forthcoming, we suspect stocks remain sanguinely oblivious still.