Surging US stocks may be prolonging the bond bull market: JPMorgan

New York

WHEN it comes to flows into stocks and bonds, forget the great rotation: It's all about the relentless rebalancing.

"The equity rally is feeding the bond rally, preventing bond markets from selling off in a risk-on environment," JPMorgan Chase & Co strate-gists led by Nikolaos Panigirtzoglou wrote in a note distributed to media on Monday.

Major US equity benchmarks ascended to fresh all-time highs on Tuesday on the back of rising optimism in the economy and encouraging earnings growth from major corporate bellwethers. The yield on 10-year Treasuries traded at 2.32 per cent ahead of the Federal Reserve meeting, after surging eight basis points.

Here's how the dynamic, according to JPMorgan, plays out: While bond fund inflows this year have been almost double those of their equity counterparts, that's in large part a by-product of price appreciation in stocks, which has boosted assets under manage…