It's a question asked in a foreboding tone when markets behave a certain way: "What does the bond market know that the stock market doesn't?"
The market behavior that prompts this query is a decline in Treasury yields coinciding with rising stock prices, and it's what we're seeing so far this year. The 10-year Treasury is near its 2019 low of 2.60 percent, while the S&P 500 is at its year-to-date high, up more than 12 percent.
The conceit of the question is that receding bond yields are a signal of slowing economic growth, rising financial risks and waning risk appetites.
If any combination of those forces is at work, then a steady climb in stock indexes would seem incongruous and perhaps ill-fated.
Yet there are reasons to doubt that there's any inherent inconsistency or acute vulnerability to the market in the current trend of strong stocks and subdued yields.
For one thing, there's nothing all that unusual about stock and bond prices rising together. (Yields move inversely to prices) It was the rule for most of the 1980s and '90s. And this relationship played out over previous phases of the current economic cycle.
In 2014, the 10-year Treasury yield sank from 3 percent to 2.1 percent over the course of the year, and the S&P 500 gained more than 11 percent, posting new record highs. Likewise, over the course of 2017, when yields slanted lower as stocks had one of the gentlest ascents in memory, rising 20 percent with hardly any pullbacks.
Then there's the fact that in recent months both stocks and bonds are pricing in a transparent and patient Federal Reserve, which is able to take this posture because inflation appears well-contained. This also is helping to compress volatility in both stocks and bonds, with the CBOE's equity volatility index below 14 at a five-month low.