Friday, August 10, 2012

Implications of 10-yr Bond Rates Hitting New 50-day Highs Along With SPX

Ten year bond rates hit a new 50-day high on Thursday in conjunction with the 50-day high in the SPX.  This is something I have looked at in the past, and the intermediate-term implications suggest possible difficulty.  I’ve shown this study a few times on the blog, most recently last October 31st.  The last time it triggered was March 13th.  I have updated the results below.

Generally it seems that higher interest rates have often made bonds an attractive investment. This may have lead people to forsake stocks in favor of lower risk returns with improved yield.  Of course the “high” yield we are now seeing certainly does not seem high.  Still, this study has triggered a number of times over the last several years and it continues to suggest struggles for the SPX.  So it seems worth being aware of.


Daniel said...


I wonder if any adjustment for "real" versus "nominal" rates is possible, for a simple clear study like this-- seems it would be more likely to muddy the waters...altho it would be more what actual bond traders think of. There isnt always universal agreement where "real" is, whereas "nominal" is of historical record, and a simple data feed.

Also I wonder if it would change the general message of the readings much... Hard to say.

Marc Prosser said...

Your article made our "best of the bond market" article today.

we said:
Quantifiable Edges: Ten year bond rates hit a new 50-day high on Thursday in conjunction with the 50-day high in the SPX - the intermediate-term implications suggest possible difficulty for stocks.

Would love to have added to your blogroll.

Best regards,

Marc Prosser
Learn Bonds

ATrader said...

Hi Rob - Interesting post. Thanks. As part of weekly study, I have done a post on performance difference by switching between bonds and SPX based on recent relative performance. Below link has details and graphs.

If post is not relevant or me posting here not appropriate then please feel free to delete the comment. Regards.