Today, I’d like to highlight how the bond market can (and often does) serve as a leading indicator for equities and commodities.
Below is a 1 year chart of Crude Oil prices (futures) pitted against energy giant Gazprom’s Corporate bonds. Note that Gazprom bonds bottomed before Oil prices did. And the subsequent turn higher in Gazprom bonds served as a leading indicator that oil prices might make a turn higher in the coming weeks. Sure enough Crude Oil bottomed and turned higher.
The “tell” was the late December divergence between the two when Gazprom bonds made a higher low as Crude Oil prices made new lows.
Another reason to keep the fixed income market on your radar as a potential leading indicator.
Gazprom Corporate Bonds vs Crude Oil prices
Thanks for reading.
No position in any of the securities mentioned at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.