Live Markets: US Treasury selloff? It’s the stock/bond correlation

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21/08/2026 12:21

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US TREASURY SELLOFF? IT'S THE STOCK/BOND CORRELATION
Concerns about inflation and America's rising debt burden have weighed on U.S. Treasuries, but another factor may be at play: investors may no longer view them as the safe-haven asset they once were.
Bonds typically rise during crises as investors seek safety, while riskier stocks tend to fall.
That did not happen with the Iran war, when energy-driven inflation boosted rate hike expectations, driving bond prices lower, while stocks quickly recovered on AI enthusiasm.
“U.S. Treasuries remain historically cheap relative to domestic macro fundamentals, with our valuation frameworks continuing to point to attractive medium-term entry levels, and scope for a dip-buying stance,” Bruno Braizinha, a U.S. rate strategist at BofA, says.
“The current valuation discount is likely to reflect this reduced utility, as investors are no longer willing to pay the same premium for duration's traditional hedging properties,” he adds.
“The utility of Treasuries as portfolio diversifiers has deteriorated as stock-bond correlations remain near their highest level since the late 1990s.”
High correlation means the two assets tend to move together, so Treasuries do not necessarily rise when stocks fall and offer less protection during market selloffs.
(Stefano Rebaudo)
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