We'll be among the first to tell you that stocks and bonds clearly vary in their level of correlation. At times stock prices and bond yields will move in opposite directions on one day while following each other closely the next.
For the most part, the long-standing conventional wisdom is that bond markets tend to benefit when stock markets are suffering. That definitely was NOT the case for much of the past 5 years, but it has generally been the case in late 2013 and early 2014. Now that the scope of pain in stocks has widened, it's also widening to scope of the bond market rally.
Today was biggest example of the "stock lever" so far in 2014 as S&Ps shed over 40 points, resulting in 10yr yields dropping nearly 10 basis points. As is typically the case for these types of moves, MBS can't quite keep pace, but still had a great day, moving 10 ticks higher to 105-04 in Fannie 4.0 coupons. Fannie 3.5s were stronger--up 17 ticks at 102-02.
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