The bulls are celebrating what they believe is another key breakout to new highs. The Dow Jones Industrial Average is over 20,000 and tech stocks are rocking again.
So does this rally have legs?
High Yield Bonds Divergence (with 10 Year T-Note) a market “tell”
As stocks were meandering sideways and beginning to “feel” heavy, the 10 year treasury note was also pulling back. It looked like another leg lower was imminent. But then we burst higher once more. So what gives?
Well, at the same time that stocks were moving sideways, the 10 year treasury bond was pulling in and high yield bonds (or higher risk bonds) were holding their own at elevated levels. This indicated that investors were still “risk-on”. As long as high yield bonds hold up, equities will continue to hold a bid.
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Author does not have a position in mentioned securities 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.