It’s extremely rare for #stocks and #bonds to both slump at the same time. On a quarterly basis, you’ve only seen about nine such episodes since 1990; and on an annual basis, it’s happened only twice (1931 and 1969, with a near‑miss in 2018).
Well, this episode is happening now, in a “perfect storm” of rising yields and economic jitters that overwhelm bonds’ traditional role as a safe haven against equity sell‑offs.
When the #dollar dries up and #collateral gets scarce, funding strains force leveraged players to liquidate across the board. And, boy, do we have a levered system! So, as hedge funds hit margin calls, they dump both equities and bonds, amplifying losses on each side of the market.
At the same time, the unwind of the once‑lucrative basis trade (borrowing in the repo market to arbitrage tiny cash‑futures Treasury spreads) has blown out yields and crushed bond prices just as stocks are reeling, creating the rare “double crash” we’re seeing now.
There’s also the matter of global investors souring on U.S. policy consistency, prompting some emerging‑market central banks to rebuild FX reserves by selling Treasuries (others are just short).
Pick your poison, although I’m skeptical about the latter point because, at the end of the day, everyone still needs dollars. There’s no currency regime shift, yet.