Another global rally in stocks is resulting in another selloff in global bond markets and in some countries, yields are breaking out. UK and Canadian 10 yr bond yields are rising to 13 month highs, and Australia and the US are back to 5 month highs. For now, the relationship is obvious in that the stock and bond markets are responding to the growing optimism for global growth but the question remains open, particularly for the overleveraged countries such as the US, of at what level do rates begin to hurt and create its own speed bump to growth. The Oct S&P/CaseShiller home price index is expected to rise to the highest level since Dec ’08 with an estimated drop of 7.2% y/o/y. The move higher over the summer was due to the home buying tax credit and moratorium in foreclosures from certain banks which are both temporary, thus prices should reverse lower in 2010. Also, mortgage rates today are at a 4 1/2 month high according to Bankrate.com.
