Last week we warned of the ominously rising risks evident under the surface in US financials. Following Yellen's decision to chicken-out yesterday, it appears interbank counterparty risk is even ominous-er. With bank stocks prices tumbling, catching down to credit market's concerns, the TED Spread - implicitly measuring interbank credit risk - jumped over 21% yesterday - to its highest in 3 years.

Is this the real reason The Fed did not hike?

and now financial stocks tumble back to credit reality...

The question is - is this the tail that is wagging the Fed's dog? Given the Fed's ownership structure, any rise in the banks' cost of financing, in an era of surging counterparty risks may be the straw that break the "confidence camel's" back. Just see Nigeria.

If so - then we have a problem - The Fed's dovish inaction is not helping alleviate any concerns.

Charts: Bloomberg