SINGAPORE (Feb 5): The Dow Jones Industrial Average dropped by about 666 points on Feb 2, a magnitude that was last seen the day after Britain voted to leave the European Union on June 24, 2016.

See: Traders are asking if the bond and stock selloff is the start of something big

This is the 9th time in the Dow’s 122-year history that the index dropped more than 600 points.

The drop coincided with a sharp spike in treasury yields last week and a crash in Bitcoins.

In a market update report on Monday, KGI Securities says, “We think that this sell-off is a correction and not driven by credit risks or systematic issues.”

According to KGI, the financial markets have been trading in a low volatility environment and spikes in volatility are common.

The CBOE Volatility Index (VIX) is currently trading at 17.31, a 70% gain from levels in Dec 2017. But this is still far from 53.29 traded in 2015.

Meanwhile, the sell-off in cryptocurrencies saw Bitcoin prices dropping by more than 50% from their highs in the past few months.

“Such price actions can contribute to volatility in other asset classes,” says KGI.

While the Dow index was declining, the US 10Y rose to a high of 2.86%, driven by fears of quantitative tightening and a potential trade war between the United States and China.

The spike in yields was also contributed by uncertainty surrounding the new Fed Chairperson’s views on interest rates and bullish jobs data.

“This steepening however, is only reflected in the 10y and not seen on the longer end of the yield curve. Spreads between the 10Y and 30Y widened by merely 3 bps since January 2018, giving us confidence that last week’s sell-off is temporary and not persistent,” says KGI.

In addition, gold prices have stalled after making strong gains since December due to the spike in 10Y yields.

Typically, there is a strong negative correlation between gold and equity prices, but gold prices fell together with equity prices in last week’s sell-off.

“We see this sell off as an opportunity to buy cheap, fundamentally strong companies which have been oversold. Investors can also opt to buy the Gold ETF (087.SG) as a short term trade to guard against a continued sell-off,” says KGI.