Low Rates Likely to Persist
A surge in global bond yields is contributing to the rotation into riskier assets. As little as a week ago, however, bond investors and traders were once again dealing with volatility across the maturity spectrum. Yields plummeted in the wake of Brexit and the fall continued through last week. Generally, when yields fall (bond prices rise), it is a sign of risk aversion as investors pile into the safety of government backed securities. This time around, stock prices rallied simultaneous with bonds. This is an interesting divergence and one that warrants our full attention. Additionally, spillover investing from other countries is part of the low yield continuation.