Volatility was back on Thursday after the markets changed their position on the likely direction of US monetary policy.

Ben Bernanke, the chairman of the Federal Reserve, had initially given the rally extra momentum yesterday when his prepared remarks to Congress were interpreted as dovish by the markets.

But in the Q&A session afterwards, the positive sentiment was extinguished when Bernanke intimated that the pace of asset purchases by the central bank could be scaled back "in the next few meetings" - the dreaded tapering of quantitative easing.

Investors were given even more reason to become risk averse soon after. The minutes of the last Fed policy meeting said that a "number" of committee members were in favour of adjusting the amount of bond buying as early as the June meeting.

It is debatable whether this marks a real shift in policy direction or if it is more or less the same as previous statements. After all, Bernanke reiterated that any decision will depend on labour market data, and unemployment is still uncomfortably high. And there have always been Fed committee members against QE.

Nonetheless, it spooked the markets, which are all too aware that the recent rally depends on continued central bank largesse. In Japan, where the rally been strongest, the Markit iTraxx Japan widened 8.5bps to 83.5bps - its biggest retreat since November 1 2012 - and the sovereign CDS widened 6bps to 70bps.

Both of these moves should be viewed in context. The iTraxx index, which is the main vehicle for taking credit risk in Japan, was trading as wide as 227bps last September, and the sovereign was trading over 10bps this time last year. Some investors are surely taking the opportunity to take profits and limit risk after such a long and extensive rally.

In Europe, the credit markets held up a little better, though the spread widening was still considerable. The Markit iTraxx Europe was 5.5bps wider at 92.75bps, with financials bearing the brunt. Lacklustre Markit PMIs in China, Europe and the US added to negative sentiment.

In the primary market, Glencore Xstrata sold its first bond since the merger earlier this year. The issue was well-received, and the widening in Glencore's CDS spreads (184bps, +6) was modest given the state of the market today.

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