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Surging Bond Yields Signalling Pain Not Growth Ahead For US Economy

Friday, November 11, 2016 20:15
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(Before It's News)

zerohedge.com / by Tyler Durden / Nov 11, 2016 1:55 PM

Submitted by Guy Manno via CrushTheMarket.com,

The US election results are in and the US stock market is enjoying a sharp rally over the shock news of Donald Trump winning the election and becoming the new President elect.On the back of the big rally in US stocks there has also been another big shift occurring in another very important asset class, US Government bonds.
US Government Bond Yields Surging
Since the news of the results of the US election were released US Government bonds have experienced a huge sell off in prices causing the yields to surge on Government bonds ranging from the 2 year bond all the way to the long end with 30 year Government bonds. (Note: Bond yields move inversely to bond prices.)Specifically the US 10 yr Govt bond has seen the yield jump from around 1.80% before the election results to the current price of around 2.13%. (See chart below)

In the chart below you can see the magnitude of the rise in US 10 yr bond yield reaching the same level of the S&P 500 dividend yield.

Traditionally bond yields help to price the relative value of stocks. If bond yields rise the dividend yield on stocks would also have to rise. Usually stock dividend yields are above bond yields to entice investors to own riskier stocks over more conservative bonds. For the yield to rise on stocks either  dividends would need to rise and or stocks would have to fall in price to lift the dividend yields.

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The post Surging Bond Yields Signalling Pain Not Growth Ahead For US Economy appeared first on Silver For The People.

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