As it is in sports, so it is in markets: The rate of change can often be more unnerving than the change itself.
That may be the most significant feature of this recent run-up in rates for fixed-income assets that investors will be forced to contend with in the coming week, after the 10-year Treasury note yield busted out to a 17.1 basis points, or 0.171 percentage point, rise, marking its most severe weekly advance since February. Bond prices fall as yields rise.
And have they ever.
Goldman Sachs analysts, including David Kostin, chief U.S. equity strategist, wrote in a research report dated Oct. 4, that stocks in the S&P 500 index “typically cannot digest rapid rises in bond yields,” like the one that played out last Wednesday and Thursday.
The strategists wrote “the speed of changes in bond yields often matters more for equities than the level.”
Goldman said historically the market can handle yield moves monthly that are within one standard deviation–a measure of how much a distribution of values deviates from statistical norms.
And the recent spike in long-date bond yields is nearly two standard deviations, matching a 1.7 standard-deviation move that occurred in January.
