#每周来晒

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TREASURY YIELDS ARE SURGING. CAN U.S. STOCKS KEEP ABSORBING THE PRESSURE?

The relationship between bonds and equities is entering another important phase.

Treasury yields have climbed sharply, with the 10-year yield recently moving above 5.2%, while U.S. equities have remained relatively resilient for much of the move. That balance is now being tested as higher oil prices, inflation concerns and expectations for further Federal Reserve tightening increase pressure across financial markets.

The key question is not simply whether yields are rising.

It is how fast they rise, why they are rising, and whether corporate earnings can keep pace with the higher cost of capital.

WHY HIGHER YIELDS MATTER

Rising Treasury yields affect equities through several channels.

First, higher borrowing costs make financing more expensive for households and companies, potentially slowing economic activity.

Second, higher Treasury returns make bonds more competitive with equities. When investors can obtain attractive yields from relatively low-risk government securities, the premium required to hold higher-risk stocks can increase.

Third, higher discount rates reduce the present value assigned to future corporate earnings. This can be particularly important for high-growth companies whose valuations depend heavily on profits expected many years into the future.

HISTORY DOES NOT GIVE A SINGLE ANSWER

Previous Treasury sell-offs produced very different equity-market outcomes.

2022 — YIELDS UP, STOCKS DOWN

The 2022 episode combined accelerating inflation with aggressive Federal Reserve tightening. The rapid increase in Treasury yields coincided with a major repricing across equities, with the S&P 500 entering a bear market.

2016 — BONDS AND STOCKS ROSE TOGETHER

The 2016 yield increase was interpreted differently. Investors largely viewed higher yields as evidence of improving economic growth and stronger inflation expectations. Equities benefited from optimism surrounding fiscal policy and deregulation.

2006 — RESILIENCE BEFORE WEAKNESS

Stocks initially absorbed higher yields relatively well. As concerns about the economic outlook intensified, however, the relationship changed and equities eventually came under greater pressure.

1999 — THE TECH BOOM OVERSHADOWED RISING YIELDS

Treasury yields climbed substantially, but the technology boom continued to dominate investor psychology. Stocks remained resilient despite tightening financial conditions, although the following year eventually brought a dramatic reversal.

1994 — AN INITIAL SHOCK, THEN RECOVERY

The rapid rise in Treasury yields initially pressured equities. But as investors became more confident that tighter monetary policy would not necessarily trigger a recession, stocks recovered even while yields remained elevated.

THE LESSON FROM HISTORY

There is no automatic rule saying:

Higher Treasury yields = falling stocks.

The economic backdrop matters.

If yields rise because growth is strengthening and corporate earnings remain robust, equities can sometimes absorb the move.

If yields rise because inflation is accelerating, monetary policy is becoming more restrictive and investors are rapidly repricing risk, the pressure can become much more severe.

WHY THE CURRENT ENVIRONMENT IS DIFFERENT

The Federal Reserve raised the federal funds target range by 25 basis points in September to 3.75%–4.00%, while stating that inflation remains elevated and economic activity is expanding at a solid pace.

At the same time, oil prices have surged amid renewed U.S.-Iran tensions, increasing concerns that higher energy costs could keep inflation elevated and complicate the Federal Reserve's policy path. U.S. stocks fell on September 28 as Treasury yields and oil prices moved higher.

That creates a delicate combination:

Strong economic activity + persistent inflation + elevated yields + geopolitical uncertainty.

The market can tolerate this combination for a period of time, but the speed of repricing becomes increasingly important.

THE REAL RISK MAY BE DISORDER, NOT SIMPLY HIGH YIELDS

History suggests that equities can coexist with elevated interest rates.

What becomes more dangerous is a sudden and disorderly repricing of bonds that rapidly changes financial conditions.

That is why Treasury-market volatility deserves close attention alongside the level of yields themselves.

WHAT TO WATCH NEXT

PCE inflation data and labor-market data are now particularly important for determining how investors assess the Federal Reserve's next moves. The September 28 market sell-off already showed how quickly higher oil prices and Treasury yields can feed into equity valuations.

The critical question is therefore not simply whether U.S. stocks can survive higher yields.

It is whether earnings growth, economic resilience and the AI investment cycle can continue to offset the valuation pressure created by increasingly expensive capital.

The next phase of the market may be determined less by the absolute level of Treasury yields and more by the speed at which yields move and whether that move remains orderly.

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