Equiti Group

Rate Volatility Comes Back to Haunt Stocks as Yields Spike With yields up about 17 bps to 19 bps across much of the curve in just one session, it’s not hard to understand why stocks are moving lower on the latest headlines. The market is unconvinced that a potential diesel ban will work as intended since it risks creating a bigger supply problem down the road. Yields are responding accordingly, hurting equities through the volatility channel. Risk assets can handle higher yields as long as the economy is doing well, but what it struggles with is uncertainty on how high they might get and how fast. Still, US stocks will look better relative to global peers, as temporary relief on energy costs would ease the immediate pressure on domestic margins while intensifying it abroad.