Bond yields on the stock market in different ways at different times.
Changes in the economy
In periods of economic expansion, bonds and stock market trade back as they compete for capital. Selling on the stock market leads the yields, as money moves into the bond market. The rally in the stock market will lead to higher profitability, as money moves from the bond market into more risky stocks. In such circumstances, when optimism about economic growth, the money will go to the stock market as it is more used for economic growth. In addition, economic growth carries with it the risk of inflation, which erodes the value of Bonds.
Interest rates are the biggest variable in determining bond yield. Rising interest rates and bond yields are bullish for stocks (and bearish for bond prices), and this implies an increase in the income that investors seek their money. Conversely, falling interest rates are favorable for stocks, as they are stimulating assets, bonds and their prices.
However, there are periods of time when bonds and stocks move together. It usually occurs early in economic recovery, when inflation pressure is weak and Central banks are willing to lower interest rates to stimulate the economy. Until the economy starts to grow without the help of monetary policy or capacity utilization reaches a maximum level when inflation becomes a threat, bond and stock markets in tandem in response to the combination of weak economic growth and low interest rates.
Investors and traders should be aware of the economic and market conditions in order to understand the constantly changing relationships between bond yields and the stock market.