Treasuries regain haven role, signaling a shift in market fears
TLT•U.S. Treasuries cushioned investors during last week’s equity selloff, with the 10-year yield falling almost 20 basis points on Thursday as the S&P 500 fell 1.2% and the Nasdaq dropped 2.6%. Societe Generale said the renewed bond hedge may signal that market fears are shifting from rates and inflation toward growth and risk appetite.
1. Bonds hedge stock losses
The 10-year Treasury yield fell almost 20 basis points on Thursday as the S&P 500 lost 1.2% and the Nasdaq dropped 2.6%, meaning bond prices rose as stocks fell. Societe Generale analysts said this may mark a shift in the market’s main concern from rates and inflation toward economic growth and risk appetite.
2. A changed correlation
Since March, equities and yields had moved in the opposite direction, according to Societe Generale. The bank said the three-month correlation between S&P 500 daily log returns and daily changes in the 10-year yield reached a 30-year low of -63% on October 1, while both equities and yields were near their 20-year highs.
3. Recent market concerns
Resilient corporate earnings had helped equities absorb higher rates, but further yield increases risked weighing on stocks. Concerns about the sustainability of the AI boom and widening credit spreads contributed to a modest equity correction over the past two weeks.
