Bond market risk appetites hold the key to the stock market right now. It is normally the case that equity and debt markets are very closely intertwined but today this true more than ever. And the bond market is signaling the party is nearly over.

I say that the relationship between bonds and stocks is more important today than ever because mergers and acquisitions activity and stock buybacks have been a major source of demand for equities over the past few years. And, to a very large degree, these have been financed by debt. So companies’ ability to access the credit markets currently has a huge impact on stock prices.

Ray Dalio says buybacks/M&A now make up 70% of all the buying volume in stocks. Anyone have data to back this up? http://t.co/JMMkR7bf5g

— Jesse Felder (@jessefelder) September 24, 2015

This is evident in the fact that, after shunning corporate bonds in September, investors rushed back into the sector in October. Stocks clearly benefitted, seeing one of the largest one-month rallies in quite some time.

Bloomberg: Record inflows into corporate bond ETFs last month https://t.co/dTp3Qf1Lb4 pic.twitter.com/gLgS7TtcSd

— Jesse Felder (@jessefelder) November 2, 2015

The Wall Street Journal reports that the rebound in October puts the corporate bond market back on track for another record year of issuance.

WSJ: Bond market risk appetites return in October https://t.co/H8N4rIJGxV pic.twitter.com/I1T31mP01G

— Jesse Felder (@jessefelder) November 2, 2015

Despite the record investor demand for these funds, however, the interest rate spread between corporate bonds and treasuries hasn’t narrowed very much at all over the past month. This means that the cost of pursuing buybacks and M&A through new debt issuance is still more expensive than just a few months ago, let alone a year ago.

Is this all the narrowing in spreads we get after record corporate bond fund inflows? pic.twitter.com/axrSBWHyJn

— Jesse Felder (@jessefelder) November 2, 2015