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By Rom Badilla, CFA – Bondsquawk.com

Wild day in the markets today!

The flight-to-quality trade is alive and well as bonds rallied, stocks collapsed, the Euro plunged, and gold soared.

The long end of the curve rallied as the U.S. Treasury yield curve flattened as investors continue to seek safety due to the escalating European debt crisis. The Long Bond outperformed the rest of the maturity spectrum as the yield declined 18 basis points to close out at 4.20 percent. The yield on the 10-Year finished the day at 3.39 percent, a tightening of 15 basis points. The yield on the 5-Year dropped 14 basis points to 2.15 percent while the 2-Year ended the day at 0.79 percent, a decline of 7 basis points.

Long Bond Intraday Chart

Bonds across the Atlantic tumbled as posted in our update.

The spread on the Merrill Lynch High Yield Master Index spiked again to 626 basis points, an increase of 35 basis points. The U.S. Corporate Bond Index closed the day at 176, an increase of 12 basis points.

BofA Merrill Lynch High Yield Index – YTD Spread Chart

S&P 500 dropped 3.2 percent to 1128.15. The Volatility Index edged down from an intraday high of 40.26 to 32.80, an increase of 31.7 percent from yesterday’s close.

The Dollar Index rallied close to a percent to 84.894 as the Euro moved lower again. The Euro dropped 1.5 percent to 1.26.

Gold Spot price appreciated 2.8 percent to 1208.57.