The bond market has seen one too many “stay thirsty” memes. For example, “I don’t always rally for more than a few days in a rising rate environment, but when I do, it’s because of massive stock losses.”
As we’ve discussed quite a few times recently (and really, any time that stock losses start pulling bond yields lower), there are diminishing returns. Bonds have a thirst that will only be quenched by significantly more abrupt panic in stocks. While today’s stock volatility might have looked like panic earlier this month, at this point in the correction cycle, it was just another day. Bonds weren’t impressed.
10yr yields were moderately higher through the morning hours, but began to recover as stocks moved lower in the afternoon. New tariff headlines caused the stock selling to accelerate, but bonds were waiting for an update from Treasury on estimated issuance for Q4. Once that came in favorably for bonds, they were more willing to rally, but never enough to move back into positive territory for more than a split second.