This is timely!
Just yesterday, we pointed out the great disconnect between stocks and US Treasuries by showing you this chart.
The S&P 500 is in green. The 10-year yield is in orange.
What you can see is that the stock market has grown considerably more optimistic, pricing in growth, and perhaps some inflation. Yields on the other hand indicate a massive, ongoing bid for Treasuries, suggesting fear and scepticism about growth.
Picking up the baton on this today is Nomura’s George Goncalves, with a new note titled: USTs Remain Disconnected vs. Other Markets.
It’s not just USTs vs. stocks that show a split.
For example, here’s a look at the gap that’s opened up between UST yields and the Citigroup Economic Surprise Index
And here’s a look at UST yields vs. 3M EUR Basis Swap, which is a measure of dollar funding costs for European banks. They’ve eased considerably since late December.
For Nomura, the bottom line is that it’s hard to be bullish on Treasuries here. Certainly other markets are suggesting that yields will rise, and furthermore, even if the data comes back off, there may not be much room for yields to fall further.
Whatever it is, it is an odd is disconnect that’s starting to raise more eyebrows.