Thursday, November 29, 2012

Can We Catch The Next Swing In Stocks vs Bonds?

Last week i talked about how to view the correlation trading behavior of stocks (ES) vs bonds (10yr yields).  I mentioned last week how 10yr yields tend to richen vs stocks, typically over the last 3-10 days of the month. 

We have seen this take place since the Friday after Thanksgiving (perfectly within our window), and would not dare attempting to fade this move until after month-end is over, which means Friday afternoon at the earliest.

The month-end richening of bonds vs stocks has been more predictable than the mid-month long-end auction related cheapening, and the fiscal cliff drama will most likely exacerbate market volatility over the next month.  Nevertheless, it doesn't hurt to watch this spread like a hawk and try to catch the next turn (and yes, i am assuming there will be a turn, if only short-lived post month-end).

stay tuned for more on this relationship via twitter...govttrader out

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