NEW YORK (TheStreet) -- With the VIX "fear index" still wallowing in the teens and the S&P 500 relentlessly making new highs, "complacency" has been the word most commonly thrown around this year to describe the stock market.
But there are signs creeping in that the market has been anything but complacent in recent weeks. Trading volume has been light, with the August lull being just partly to blame, and Treasury yields have declined to 52-week lows. Yields pierced 2.4% late Thursday night, after President Obama announced plants to go forward with an air strike in Iraq. The 10-year note was surging 11/32, driving the yield to 2.375% Friday without much help from the Federal Reserve as it continues to taper its bond-buying program.
The main reason volume has been so thin and Treasury yields are being pressured is investors have been de-risking from stocks and flowing out of junk bond funds and high-yield bond funds in search of safety. They want a place to hide right now. That correlation can be clearly seen in the chart above, which shows the inverse relationship of high-yield corporate bonds, tracked by the iShares iBoxx High-Yield Corporate Bond Fund (HYG), vs. the VIX.
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