Bonds' Rising Correlation With Oil Prices Challenges Investors
- Oil’s biggest three-day rally in 25 years whipsaws bund yields
- France's AFT: Oil may suppress yields for best-rated nations
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The strongest correlation between oil prices and European bond yields in six months may turn out to be a challenge for investors assessing the outlook for prices.
The yield on German 10-year bunds, Europe’s benchmark sovereign securities,
has jumped almost 30 basis points, or 0.3 percentage point, from a more than two-month low of 0.51 percent reached last week. That partly reflects the crude market’s volatility that saw Brent oil futures jump 26 percent in the three days through Monday. The bund yield is back above the levels from Aug. 11, when China’s currency devaluation sparked a selloff in emerging markets and pushed the prices of commodities lower.