MBS Day Ahead: The Middle Ground For Rates vs Stocks


Posted To: MBS Commentary

We often use terms like "stock lever" and concepts like asset allocation to discuss the conventional wisdom of stock prices and bond yields moving in unison. I'll be the first to tell you what a bad idea that is if you're expecting a certain amount of movement in one to correlate with a predictable amount of movement in the other. Just a week and a half ago, I'd been looking for a break above 2600 in the S&P to coincide with a challenge of 2.75 or 2.82% in 10yr Treasury yields. But instead, bonds were able to remain well under 2.75% even as stocks suggested a breakout. That's not to say there's no correlation–far from it! In fact, I would consider the next big move in stocks to be one of the most important sources of inspiration for the next big move in bonds…(read more)

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