Thursday, May 19, 2016 10:12:55 AM
BY ART HILL
Treasuries Signal Risk On
I featured charts of the 10-YR Treasury Yield ($TNX), Finance SPDR, Regional Bank SPDR and Broker-Dealer iShares on Tuesday. These were shown together because I thought the 10-yr yield was at its moment-of-truth. Well, $TNX made a big statement yesterday with its biggest move since mid February. This also happens to be when the S&P 500 bottomed and began a strong run. The short-term breakout in the 10-yr yield is positive for stocks because stocks are positively correlated to the 10-yr yield (and negatively correlated to the 7-10 YR T-Bond ETF). It also means that money is moving out of safe-haven bonds and this money may find its way into riskier assets, such as stocks. Note that utilities, consumer staples and REITs often underperform when the 10-yr yield rises.
Treasuries Signal Risk On
I featured charts of the 10-YR Treasury Yield ($TNX), Finance SPDR, Regional Bank SPDR and Broker-Dealer iShares on Tuesday. These were shown together because I thought the 10-yr yield was at its moment-of-truth. Well, $TNX made a big statement yesterday with its biggest move since mid February. This also happens to be when the S&P 500 bottomed and began a strong run. The short-term breakout in the 10-yr yield is positive for stocks because stocks are positively correlated to the 10-yr yield (and negatively correlated to the 7-10 YR T-Bond ETF). It also means that money is moving out of safe-haven bonds and this money may find its way into riskier assets, such as stocks. Note that utilities, consumer staples and REITs often underperform when the 10-yr yield rises.
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