Will the rise in Rates Roil the Stock Market

by Laura Ehrenberg-Chesler on June 5, 2015

in Bonds,Crossvault Capital,equity market,Fixed Income,interest rates

The U.S. got a good jobs number this morning. We added 280,000 new jobs in May. The expectation was for 225,000. This news caused Treasury prices to drop, and yields to rise, with the 10-year now trading at 2.409%. At our firm, we have been debating over the past few weeks and months, whether this rise in rates will cause some near term dislocation in the equity markets. In a CNBC interview with Jeffrey Gundlach and Jim Bianco on June 3, Mr. Gundlach mentioned the fact that there are few traders, or investors, still active in the markets today, that have experienced a secular bear market in online casino bonds, and there has actually never been a bear market in the junk bond market. We also have a fixed income market that is not as liquid as in the past due to increased regulation pushing banks and investment banks out of fixed income trading. We think the rush for the

exit in bonds may cause additional volatility and some dislocation in the equity markets, as asset classes tend to move in tandem during times of increased uncertainty; in this case the increased directional uncertainty of yields.

Leave a Comment

Previous post:

Next post: