Mar

26

A startling divergence has occurred between bonds and stocks over the last four days with bonds down in price three points to within the lowest levels of the last few years and stocks at the opposite as always recently, near or at the pre Lehman September 2008 highs. The wisdom of a Lobagola and the Former Luminary, and the study of the work of Dimson and Lorie would be necessary to ascertain what this divergence portends.

In the old days the sight of Morse emerging from Trinity Church was enough to bull up Trolley or Union 10 points or more even after he had to scratch the backs of the members for lunch.


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  1. michael bonderer on March 26, 2010 12:37 pm

    At what bond price do bond yields start reflecting fear that the US won’t be able to finance? Thus far my sense is that the divergence reflects mere Treasury supply and perhaps technical cash selling in longer Treasuries related to negative IR Swap spreads, raising yields and putting a nice bid in the dollar. Bond/S&P correlations have definitely come way down. Interestingly from Marc Chandler @ Brown Brothers just showed that euro/dollar correlation to S&P 500 (daily) has dropped to 44% from 50% last year. In pre-crisis, this correlation was 20%. (See today’s FT, The Short View).

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