Us Treasuries are surprisingly strong this summerBeat all other assets from small-cap stocks to commodities.在Bank of America CorporationIn the eyes of the technical team, this is a worrying signal.
The ratio of Treasury futures to the Russell 2000 index has risen since hitting an all-time low in March as precarious reflation trading weighed on small-cap stocks. Commodities are similar: bonds have made a comeback because of the poor performance of copper and oil prices over the past few months.
In the past, when this ratio bottomed out, it usually meant that bonds were expected to rise-possibly weakening risk appetite by the end of the year, says Bank of America Corporation. The warning comes amid a surge in COVID-19 cases around the world, questions about the efficacy of vaccines against variants of Delta virus and uncertainty about when the Fed will start reducing its size.
"this cross-asset conundrum casts a shadow over risk-taking in the second half of 2021," Bank of America Corporation strategists Paul Ciana, Adarsh Sinha and Janice Xue wrote in a report on Tuesday. "the rise in the ratio indicates a trend towards rotation and / or rebalancing towards safe assets, which will continue as long as supporting factors remain."
After hitting a high of 1.77 per cent at the end of March, US 10-year Treasury yields have fallen by nearly 50 basis points, driven by safe-haven flows, despite a series of higher-than-expected inflation reports. The decline in yields has helped large technology stocks regain their dominance, NASDAQThe 100th index rose more than 19 per cent in 2021, while the Russell 1000 index rose nearly 12 per cent.
While Wall Street generally expects yields to rise by the end of the year, safe-haven flows limit the rise in yields amid increased uncertainty. The yield on the benchmark 10-year Treasury note edged higher on Tuesday to about 1.29 per cent, still within the range of the past month.