“Behind every exquisite thing that existed, there was something tragic.”

We’ve reached that point of the cycle. The dust sheet is falling off the canvas, the credit market’s mid-September illusion of youthful energy is gone, confronted in October by the gnarly true portrait that’s been locked up in the attic. Happy Halloween.

Having predicted in my last Macro Prophet column that volatility was about to jump, I still experienced a jolt after returning from holiday to witness the extent of credit spread widening in subsequent sessions.

The spooky risk-off sentiment has been well documented by my colleagues here, here and here. It’s instructive that US high yield credit derivatives index CDX HY once again approached the wides of the year it hit back in March, at 526bps. European counterpart iTraxx Crossover, at 473bps, also reached a level where short-leaning traders could realistically contemplate testing the 516bps March wides again if headlines provide enough fuel. The psychological battle is on.