Recent analysis indicates a notable change in the relationship between oil prices and U.S. Treasury yields, which previously moved together but have diverged in recent weeks. This shift suggests that concerns over economic growth are becoming more significant than inflation worries. The Federal Reserve is observing these changes closely, as they may impact future interest rate policies.
Key facts
- Correlation between oil prices and bond yields was 77% for 30 days ending September 10.
- Current correlation is approximately negative 10%.
- The shift occurred after geopolitical events, including an attack on Iran.
- Federal Reserve Chairman Kevin Warsh commented on the changing correlation.
- Higher energy prices may slow economic growth.
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