Another day, another headline with the word “stocks.” Yesterday it was a stock market recovery pulling bond yields higher. Today it’s renewed weakness in equities leading yields to their lowest levels since late April. But in today’s case, we have to acknowledge the bond market’s leadership in the rally, at least as far as the pace is concerned.
This is actually the opposite of what had been happening late last week when stocks were making lower lows while bond yields bounced at the same low. Using the same starting point (Thursday’s lows), we now find 10yr yields making the lower lows while stocks are actually flat to slightly higher.
This is a potentially important development in the bigger picture because it brings 10yr yields right to the edge of a significant pivot point at 2.72%. It also keeps hope alive that stochastics can reach overbought levels without bouncing (i.e. the blue/red lines in the chart below making it all the way to the lower horizontal line). If that happens, it fits the pattern of precedents that have broadly confirmed a top in rates after major selling sprees.