Compared to Oil, Yields Not Quite as Willing to Drop

Compared to Oil, Yields Not Quite as Willing to Drop

While the moment-to-moment correlation between bond yields and oil prices remained almost perfectly intact today, yields were less willing to follow the bigger drops. In other words, if we benchmark bonds to oil price movement, they underperformed the drop in oil prices. $139 billion in Treasury auctions and defensive positioning ahead of Wednesday's Fed announcement likely both contributed to that underperformance. Bottom line: it's encouraging to see the willingness to follow oil, but we won't be able to see more unrestrained trading until after Wednesday afternoon.