After a short period of relative calm, it appears rising global bond yields, led by US Treasuries, are again going to prove a headwind to equity markets.
The rise in bond yields, and associated rise in volatility, was what triggered the early February correction in equity markets. We need to be aware that US bond yields have made new highs and have taken out technical resistance. The new highs in bond yields were too much for Wall Street, with the S&P500 intraday reversing and ending around 1.6% below its highs of the day.
I have been warning investors on bonds, and bond like equities, for a long-time. I believe we are going from Central Bank quantitative easing (QE) to Central Bank quantitative tightening (QT). At the same time, the US has lost all fiscal discipline under Trump and will now run huge budget deficits that require record issuance of US Treasuries. The world, led by so called bond vigilantes, is going to charge the US a higher interest rate to fund its deficits.