Bank of America: US stocks and corporate bonds may be recovering from the repricing shock caused by the "historic sell-off" of US bonds.

Recently, U.S. Treasury bonds continue to suffer a sell-off, so that the "global asset pricing anchor" U.S. bond yields continue to soar, once caused U.S. stocks under pressure, much market attention. But Bank of America strategists recently relieved investors that the impact of the U.S. bond sell-off on investment-grade corporate bonds is waning, and the negative correlation between the bond market and the stock market is decreasing, and the situation is slowly improving. Bank of America strategists said that in recent weeks, corporate bonds and the stock market have no longer followed the trend of the bond market and are moving out of their own trend. This is a positive signal for economic growth and is conducive to risky assets, although U.S. Treasury bonds continue. Under pressure. Strategists say the stock and bond markets are balanced against each other, and it now looks like the equilibrium has moved slightly towards a weakening of the negative correlation. According to Bank of America's analysis, the 20-day positive correlation between U.S. investment-grade corporate bond yields and 10-year Treasury yields has fallen to 21 percent from 53 percent in early September, while the negative correlation between 10-year U.S. Treasury yields and the stock market has fallen to 24 percent from 85 percent in early August. Volatility in U.S. Treasury yields has been at the center of attention as investors try to assess whether there will be another rate hike. The stronger retail sales data released this week reinforced expectations of "higher interest rates for longer", leading to a sell-off in US Treasuries and worsening conditions ahead of the 20-year Treasury auction. While the benchmark 10-year Treasury yield has risen nearly 30 basis points this week and hit a new high since 2007 on the 18th, the trend in U.S. stocks and investment-grade corporate bonds has remained largely stable over the past few trading days. Strategists said that the weakening of the correlation between the stock market and the bond market means that risk assets are gradually resisting the pressure from the bond market sell-off, but it is still too early to judge whether this trend can continue; "The stock market's response to the US Treasury bond sell-off has weakened recently. It is a good thing, but if the US Treasury bond is sold at an accelerated rate, the situation will change. There is still a lot of uncertainty about the trend of US Treasury bond yields." On the 19th local time, the yield on the 10-year Treasury note continued to rise to 4.931 per cent, approaching the 5 per cent mark. Wall Street has previously reported that the pressure on U.S. Treasury bonds is related to the selling of major overseas central banks. The latest International Capital Flow Report (TIC) released by the U.S. Treasury Department shows that overseas investors' purchases of U.S. Treasury bonds have fallen into a bottleneck, and purchases in July this year It only increased by 0.2 about US $1 billion, the smallest scale since April 2022. Among them, overseas central banks sold a large number of U.S. Treasury bonds in July, with a net sales scale of $22.4 billion, almost wiping out the purchase scale of $24.5 billion in June, and the largest sell-off since selling $46.1 billion of U.S. Treasury bonds in January. However, despite the spread of the US Treasury sell-off storm, Jeffrey Gundlach, founder of the DoubleLine Capital and new debt king, still called for the purchase of US Treasury bonds, saying that next year's recession will lead to a rebound in US Treasury bonds. * *