Home > Lessons from the trading floor > Bond Market Clues to the Equity Market

Bond Market Clues to the Equity Market

Often in trading there are relationships between two different markets that give a trader clues as to the direction of one or both of those markets. Watching the activity in the bond market can sometimes give clues to the direction of the equity markets.


Frequently when the bond market is going up the equity market is going down as has been happening over the last few days, or vice versa. These patterns tend to be driven by asset allocation models that shift capital between the debt and equity markets, buying one and selling the other. These patterns can become apparent over short intraday time frames or they can persist over a period of days as we have seen this week.


My personal preference for keeping tabs on the bond market is the iShares Lehman 20 year Treasury bond ETF, ticker symbol TLT. The other thing I find useful to watch believe it or not is the 10 year bond yield on the CNBC ticker. Since yield and price movements are inversely related in the bond market as yield goes down prices are going up and vice versa. This is a simple but surprisingly useful tool.


The lesson here is to try to find interdependencies between markets, be they inverse or direct relationships, that can help give you a bit of an edge in the market you are trading. Happy hunting.




  1. Joe Nathan
    September 5, 2008 at 2:36 am

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