MBS Day Ahead: Bonds Keeping an Eye on Stocks


Posted To: MBS Commentary

The relationship between stocks and bonds is difficult to speak about intelligently, unless you're prepared to define it in different ways depending on the time frames considered and the market moving variables in play. For instance, over short time frames, we tend to see more correlation between yields and stock prices. This is most in-line with the conventional wisdom of traders moving money out of one asset class and into the other (i.e. buying stocks and selling bonds ). This conventional wisdom-based relationship would result in a chart of stock prices and bond yields moving in the same direction, as has been the case over the past few weeks. The most notable exceptions to the conventional wisdom have occurred when quantitative easing has been up for debate. On most days in mid-2013…(read more)

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