Researcher's Bond Yield Spike Prediction Comes True as Stocks and Bonds Move in Tandem

Researcher predicted years ago that as Fed unwinds bond portfolio, yields would spike if stock-bond correlation turned positive.

The idea was that positive correlation makes bonds less appealing to investors as a hedge against stocks.

Yield spikes have now happened as predicted, as stock and bond markets move together amid Fed tightening.

Researcher says higher yields make sense given inflation, fiscal needs, etc, but thinks extent of rise has been "silly."

Limits on arbitrageurs' balance sheets also help explain global linkage in yield spikes despite different country fundamentals.