US: Risky assets tend to perform relatively well during bond selloffs - Natixis

According to the analysts at Natixis, looking at the past episodes of bond selloffs in the US market, their analysis suggests that risky assets tend to perform relatively well no matter the bond selloff is driven by a significant change in the term premium or by a combined change in term premium and interest rate expectations.

Key Quotes

“One noticeable exception though is for the US Dollar which tends to appreciate in the former case but fails to appreciate in the latter.”

“We view the Tapering Tantrum episode of 2013 as a specific episode, as it was entirely driven by a termpremium adjustment and as it adversely impacted emerging and corporate US High Yield.”

“Looking at investment flows into US equities and US bonds during selloff episodes, we finally find that it is difficult to observe any regular pattern. Basically, bond selloff episodes cannot be seen as episodes when US assets were shunned as we fail to observe simultaneous outflows from the US bond and from the US equity markets during these periods. The only exception is the Taper tantrum episode, which confirms the uniqueness of the 2013 episode.”