Investors have found a ray of hope amidst turbulent bond market conditions, as Bank of America Corp (NYSE:BAC).'s strategist Yuri Seliger hints at a slow yet steady path towards recovery. Current dynamics indicate that stocks and corporate bonds are charting their own course, independently of the primary global bond market's instability, reflecting cautious optimism about economic expansion stimulating risk appetite amidst major market fluctuations.
Seliger has observed a subtle shift towards less negativity. Data from Bank of America indicates a reduction in the 20-day positive correlation between US investment-grade spreads and the 10-year Treasury yield, which fell from 53% at the start of September to 21%. Simultaneously, the negative interaction between rates and stocks has moderated to 24%, a significant increase from 85% in early August.
Investors continue to grapple with rate volatility as they attempt to predict future interest rate paths. The release of robust retail sales data this week bolstered the argument for sustained higher rates, leading to a Treasury sell-off ahead of a 20-year bond auction. This emerging trend suggests that risk assets are gradually building resilience against rate shocks. However, whether this pattern will persist is yet to be determined.
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