Oil prices and bond yields no longer moving together
Zoom in: As such, on days when oil futures pointed to higher prices, bonds almost always sold off and their yields — which move in the opposite direction from their prices — rose.
Key points
- In his news conference two weeks ago, chairman Kevin Warsh pointed to "a stable correlation" between oil prices and interest rates for much of this year, and while noting that he is not the author of a Wall Street newsletter, he nonetheless mused on the relationship at some length.
- Interest rates have rolled over to the downside." "To the extent that oil prices were to move lower, again, probably due to geopolitical events, that's something that we're going to have to interrogate.
- As long as the AI and data center boom was powering ahead, seemingly impervious to energy price shocks or bubble fears, the inflationary impact of higher oil prices dominated the economic outlook.
Treasury yield; Chart: Neil Irwin/Axios For much of this year, on any given day, you could look at the price of oil and correctly guess what happened to bond yields.
In other words, on days when oil rises, it's more likely than not that bond yields fall.
Additional details
- What they're saying: "That correlation has been quite strong, until very recently where you've seen oil prices continue to move up, largely due to geopolitical events," he said.
- Traders were pricing in a world where inflation is higher for longer, and central banks react by raising rates more — and betting, implicitly, that growth would prove resilient despite the energy price headwind.
- But with that sector wobbling, the economy may be more vulnerable to a growth slowdown as higher prices for gasoline, diesel fuel and other energy products weigh on activity.
- On the one hand, more expensive fuel can ripple through prices for everything else.
- Data: Axios analysis of FactSet data; Note: Correlation over preceding 30 trading sessions between daily change in West Texas Intermediate crude and change in 10-year U.S.
How this summary was made: extractive summary — built from the sources' own reporting. It is drawn only from the reporting of the sources listed below — read the originals for full detail. How we summarize →
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