© Reuters.
Investors have found a ray of hope amid turbulent bond market conditions, as Bank of America Corp (NYSE:) strategist Yuri Seliger hints at a slow but steady path to recovery. Current dynamics indicate that stocks and corporate bonds are charting their own course, regardless of instability in the global primary bond market, reflecting cautious optimism that economic expansion spurs risk appetite amid significant market fluctuations.
Seliger has observed a subtle shift toward less negativity. Data from Bank of America indicates a reduction in the 20-day positive correlation between US investment grade spreads and the , which fell from 53% in early September to 21%. At the same time, 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 strong retail sales data this week bolstered the case for sustained higher rates, leading to a sell-off in Treasuries ahead of a 20-year bond auction. This emerging trend suggests that risk assets are gradually gaining resilience to rate shocks. However, it remains to be determined whether this pattern will persist.
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