MBS Day Ahead: Are Stocks and Bonds Correlated Right Now? It’s Complicated

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Posted To: MBS Commentary

As we discuss off and on over the years, the relationship between stocks and bonds is always complicated. At times, it seems as if bond yields and stocks prices are following each other in lock-step. That's been true of most of the big moves in the 4th quarter of 2018, but there have still been noticeable divergences. Those divergences give us clue as to which side of the market is holding the better cards. As is often the case when looking for such divergences, it's often simply a matter of finding the right time windows to compare. For example the interesting pattern seen over the past 3 days could get lost in the shuffle if you zoomed out too far, or in too close. The chart below is just right . It shows the strong correlation from earlier in the week followed by a clear divergence…(read more)

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