10 Year Treasury Marches Higher as Stocks Spike

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The 10 year treasury shot up to near 2.5% this morning, yet stocks have moved higher in a move that reeks of folks ‘buying the bottom’.  For us it is a welcome sign–no panic.  Remember that over the last 10 years we have seen time and time again that it isn’t necessarily the pure level of interest rates that panics stocks, but instead is the speed of the movement in rates.  It would appear that at this point in time movements of a few basis points (or even 6 or 8) higher are being handled with ease by equities.  It is interesting to note that utilities are moving nicely higher today–a sign to us that those investors believe that interest rates are near the peak for the time being.  This may or may not be true–but it doesn’t matter as investors are eyeing those better yields that have been created in that sector.  REITs are off a little even with the strong DJIA–obviously very out of favor at this time. 

As mentioned yesterday any pop in interest rates of 20-30 basis point in a day will present very substantial challenges to all markets. 


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