Thursday, September 13, 2012
Correlation of Rates and S&P 500
Operation twist has had the opposite effect on rates that outright QE has had, but equities have rallied during twist just like they did during QE1/2. This has lead to a divergence between equities and interest rates over the past year. Previously equities and rates had been relatively correlated: when equities moved higher so did interest rates. Recently though, the daily correlation has broken down and over the past year has actually turned slightly negative.
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