Stock futures inched higher on Thursday, as Treasury yields dipped and stress eased in Asian markets.
“The recent very strong correlation between bonds and equities that started bearishly for both in August around the QRA [quarterly refunding announcement] and flipped bullish in October around the QRA, has flipped bearish again in 2024,” Deutsche Bank said.
“History tells us the tight correlation won’t last forever, and one will break out from the other, but for now the relationship is lockstep[…], ” Deutsche added.
Traders were pricing the chances of at least a 25 basis point rate cut by the Federal Reserve at its March meeting at 63%, down from 73.3% a week ago.
“The recent divergence between market expectations for rate cuts and the recent Fed rhetoric is gradually tilting toward the Fed’s stance,” SPI Asset Management said.