Traders work on the floor of the New York Stock Exchange shortly after the markets opened in New York September 3, 2015. REUTERS/Lucas Jackson
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The "flight to safety" into bonds many expected when U.S. stocks slumped last week never took off, making big losers out of prominent fund managers and further confusing investors at a volatile time in the market.During the recent U.S. stock market sell-off in the third week of August, for instance, the S&P 500 dropped 9 percent, but U.S. 10-year Treasury yields, which move inversely to prices, fell by only 12 basis points.According to Bank of America Merrill Lynch, the relationship between stocks and bonds that has held since 2009 suggests 10-year yields should have declined by 22 basis points.The message the Fed delivered over the weekend came between a Friday and Monday that saw the U.S. Standard & Poor's 500 lose 7 percent of its value.It's not clear whether China has sold U.S. Treasurys over the last month, or if so, how much. Bank of America Merrill Lynch speculated in a research note that if China sold between $7 billion to $10 billion a day of U.S. Treasurys in the three weeks since the Chinese yuan devaluation on Aug. 11, it might have dumped as much as $150 billion in U.S. government bonds.
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