Bond Yields Are Trending Lower

The first quarter’s dramatic surge in bond yields had a big impact on the market, shifting money from growth stocks to value plays. However there are growing signs of this trend reversing.

The chart of 10-year Treasury yields shows how a channel has formed since late March. If it continues in its current trajectory, yields could go back toward 1.40%.

Overall this isn’t a huge surprise considering the economic data, which has worsened considerably this month. We started with weak job growth, then saw poor retail sales followed by a major slowdown in housing. Consumer sentiment and confidence both missed estimates.

The market has priced a lot of good news into bonds, and now it’s not entirely panning out. Fed officials are still mostly dovish. The result could be lower bond yields and a shift away from value. That could be good news for big tech stocks and the Nasdaq.

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