Published Fri, 08 Nov 2019 11:46:49 -0500 on Seeking Alpha
How much higher can bond yields go before equities are knocked off their perch?
That's a question that's likely to be on the lips of many market participants in the weeks ahead assuming all signs continue to point to an interim trade agreement between the world's two largest economies.
Over the past two years, investors have received a crash course in the myriad factors that determine how stocks respond to dramatic moves in bond yields beyond the mechanical implications (i.e., beyond what yields say about the relative attractiveness of stocks).
For instance, in August, the furious bond rally that accompanied renewed trade jitters undercut risk sentiment, as declining long-end yields were seen as signaling something dire about the prospects for the global economy. It didn't help that the plunge ended up inverting the 2s10s on August 14 (just a day after the Trump administration attempted to ameliorate trade concerns by splitting the next planned tariff escalation into two tranches).
On the flip side, sharply rising yields contributed to the selloff in October 2018, and if you recall, "Vol-pocalypse" (the historic VIX ETN "extinction event" in February 2018) was preceded by rapidly rising yields.
The following chart shows weekly gains/losses for the S&P (top pane and bottom pane) overlaid with 10-year yields (top pane) and weekly gains/losses for the iShares 20+ Year Treasury Bond ETF (TLT):
In the lead-up to the February 2018 VIX... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|BLACKROCK INCOME TRUST||6.02||0.0||0.00||0.00||6.85|
|VANGUARD EXTENDED DURATION TREASURY ETF||137.28||0.0||0.00||0.00||2.29|
|ISHARES BARCLAYS TIPS BOND FUND||115.82||0.0||0.00||2.15||1.85|
|SPDR S&P 500 ETF||301.29||0.0||0.00||5.42||1.82|
|SPDR BARCLAYS CAPITAL 1-3 MONTH T-BILL ETF|
Older articles featuring Blackrock Income Trust (BKT):Coronavirus Roundtable - The Yield Squeeze And Income Opportunities
Betting On Bonds: Why A 2% Yield Isn't So Crazy
Dividend Reliability During A Recession
Treasury Yields: Waiting On The Next Catalyst
April Yield Curve Update: Backing Off
Inverted Yield Curve Fears Are Early
Could Treasury Yields Make A Comeback?
Yield Curve - Understanding All The (Conflicting?) Messages: Part III
Yield Curve - Understanding All The (Conflicting?) Messages: Part II
Yield Curve - Understanding All The (Conflicting?) Messages: Part I