US Treasury bonds were unexpectedly strong this summer, beating all other assets, from small-cap stocks to commodities.inBank of AmericaIn the eyes of the technical team, this is a worrying sign.

The ratio between US Treasury futures and the Russell 2000 index has risen after hitting an all-time low in March, as precarious inflationary trading dragged down small-cap stocks. Commodities are similar: bonds have taken a back seat due to the poor performance of copper and oil prices over the past few months.

Bank of America said that in the past, when this ratio bottomed out, it usually meant that bonds could be expected to rise — possibly weakening risk appetite until the end of the year. This warning comes at a time when COVID-19 cases are surging around the world, the efficacy of the vaccine against the delta virus variant is being questioned, and there is uncertainty about when the Federal Reserve will begin to reduce the rate.

“This cross-asset conundrum casts a shadow over risk taking in the second half of 2021,” Bank of America strategists Paul Ciana, Adarsh Sinha, and Janice Xue wrote in Tuesday's report. “The rising ratio indicates a trend of rotation and/or rebalancing towards safe assets, which will continue as long as the supporting factors remain.”

After hitting a high of 1.77% at the end of March, US 10-year Treasury yields have fallen nearly 50 basis points, driven by safe haven capital flows — despite a series of inflation reports that have exceeded expectations. The decline in yield has helped big tech stocks regain their dominance,NASDAQThe 100 Index rose more than 19% in 2021, and the Russell 1000 Index rose nearly 12%.

Although Wall Street generally expects yields to rise before the end of the year, in the face of heightened uncertainty, the flow of safe-haven funds limited the increase in yield. The benchmark 10-year US Treasury yield rose slightly to around 1.29% on Tuesday, still within the range of the past month.