Black Monday’s stock-market warning signal came from the bond market — and it’s back, says Wall Street veteran

Bonds are once again flashing a warning signal that's been associated with equity market volatility, according to Larry McDonald, a Wall Street veteran. He notes that bonds are currently delivering "equity-like returns," a phenomenon that occurred during the summer of 1987, just before Black Monday, the infamous stock market crash.

This development is worth paying attention to because bond yields are typically expected to be more stable and less correlated with stock prices than equities. When bonds start behaving like stocks, it can be a sign that investors are becoming increasingly risk-averse, or that there's a growing sense of uncertainty about the economic outlook. In the context of the current market environment, this could be related to concerns about inflation, interest rates, or the overall health of the economy.

To watch next: The relationship between bond yields and stock prices will be an important one to monitor in the coming weeks and months. If bond yields continue to rise and behave in an "equity-like" manner, it could be a sign that a market correction is on the horizon. Investors will also be keeping a close eye on economic data releases, central bank policy decisions, and any other factors that could influence market sentiment and the interplay between bonds and stocks.

Originally reported by marketwatch.com. BondNews adds analysis for finance & markets readers.