USD/JPY sank to a 4-week low on Wednesday while US and European yields tumble in the face of a slide in the European banking index that fell in its biggest one-day drop in nearly 13 months. Credit Suisse's 2022 annual report was published on Tuesday and it cited "material weaknesses" in its internal controls over financial reporting, noting that it had not yet stemmed customer outflows. This has provoked a flight to safety in financial markets, massaging the downside in USD/JPY. 

At the time of writing, USD/JPY is done by over 0.7% but off the lows of the day that were printed at 132.21. The currency pair dropped from a high of 135.11 in the Europen session and is back to trading at around 133.30 at the time of writing. Two-year Treasury notes have dropped 98 basis points in the last five days, the biggest drop since the week of Black Monday on Oct. 19, 1987.

Markets are now pricing in an 80% chance of a 25 basis point Federal Reserve hike next week. Investors are also pricing in a 50% chance of no change. Moreover, the December Fed funds futures, which reflect the overnight rate that banks use to lend to each other has dropped to 3.62% in a sign market expect the Federal Reserve to be cutting interest rates by year's end, if not before.