The yield on the 10-year Treasury fell 25 basis points to 3.75% today, September 28. The yield on the very policy-sensitive 2-year Treasury dropped to 4.08% from 4.28% yesterday.
And stocks climbed. As of the close today, the Standard & Poor’s 500 was up 1.97% and the Dow Jones Industrial Average was higher by 1.88%. The NASDAQ Composite had climbed 2.05% and the NASDAQ 100 had gained 1.97%. The small-cap Russell 2000 was ahead by 3.17%.
And what was the cause of this move upward after so many days of marching in the other direction?
Nope, not the successful NASA test of an asteroid buster. Not even news that investments from Kevin Durant and Billie Jean King had brought the women’s pro volleyball league closer to a 2024 launch.
Look instead to the Bank of England. After a day when everybody with a Twitter account told the U.K. government how stupid its tax cut plan was while the pound was crashing, the Bank of England intervened in the bond market by saying that it would buy long-dated government bonds in whatever quantities were necessary to stabilize the bond and currency markets. For the day the pound is up almost 1.4% against the U.S. dollar.
With the dollar down–the Dollar Spot Index (DXY) is down 1.19% today–oil and other commodities rose.
West Texas Intermediate, the U.S. crude benchmark, gained 4.52%. Gold for December delivery gained 2.00%. Copper for December rose 3.17%.
The jump in stock and bond prices came even as Federal Reserve officials continued to talk of higher interest rates. Atlanta Fed President Raphael Bostic talked of the need for another 75 basis point internet rate increase in November and another 50 basis point move in December.
But for the moment, it looks like bond yields have moved up too far, too fast, and that some investors are finding stocks and bonds attractive at current prices as long as it looks like bond yields might take a breather.
