News

Correlation Between Stocks And Bonds Hit The Highest Since 1999

After being mostly in negative territory over the past 15 years, the correlation between stocks and bonds jumped to the highest level since 1999. According to Bloomberg data, the 60-day correlation between S&P 500 Futures and 10-Year U.S. Treasury Note Futures spiked to 0.533 on Friday, the highest since September 1999.

This strong and positive relationship confirms that equities are now more sensitive to the bonds market and more especially to inflation. In other words, it seems that the previous macro regime of contained inflation — well below policymakers’ target — came to an end.

Earlier this week, we saw that both equities and bonds reacted negatively to the spike in U.S. CPI, with bond-market gauges of future price pressures reaching multiyear highs. The Consumer Price Index increased by 0.8% MoM in April, smashing consensus forecast of 0.2%. It was the largest jump since June 2009. In the meantime, the so-called core CPI — excluding food and energy — rose 0.9% MoM, the most since April 1982.

MORE

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s