With European Dollar Swaps at new extremes...the dollar shortage is acute and likely to blow up at any moment - which in this case will drive lower treasury rates. Ironically, this dollar shortage has probably been a part of the deleveraging that has driven the equity market ramp...but that kind of deleveraging WILL break into outright selling also...and it seems like the setup is there for that.
It not necessary that markets needed to go down immediately as SWAP lines increased dramatically - since many of these banks deleveraging and using the FX Swap lines have obligations to deliver as promised for derivatives and using these swap lines a sign of desperation. Incidentally, this is why I have referred to this crazy ramp in risk assets as a deleveraging.
