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One of the most stunning new trends in the financial markets has been the precipitous sell-off in Treasury securities. This is also known as the risk-off trade.But where is the risk being put on?
Stocks have been rallying, but on low volume, which suggests that all of the money isn’t going from Treasuries to stocks.
Art Cashin, UBS Financial Services director of floor operations, wrote about this in his market narrative of this morning’s Cashin’s Comments:
A sidebar on bond yields. The rate at which Treasury bonds have slumped and yields have risen suggests some significant selling. The amount of money raised, if fully invested in the stock market, would have sent the averages much higher (in the opinion of many traders). Some bond types claim a large chuck of the money is being parked in cash. That raises a key question why and the parallel – by whom.
If it is pension and mutual fund money, why wouldn’t they finish the shift and buy stocks? That leads some traders to wonder if China might be involved – sales by China would not automatically go into stocks. An interesting hypothesis that we hope to investigate.