Can Wall Street keep partying while bond markets burn?
SPY•Treasury yields have reached their highest levels in at least 20 years while the S&P 500 and Nasdaq hit record peaks, with this year’s gains around 15% and almost 20%, respectively. Rising real yields appear tied to strong growth expectations, though a 12-year high in the 10-year term premium could threaten the rally.
1. Stocks defy rising yields
The S&P 500 is up around 15% and the Nasdaq almost 20% this calendar year, despite a 120-basis-point rise in the 10-year Treasury yield and a 24-year high in ultra-long U.S. bond yields. The article says inflation-adjusted real yields appear to be the primary driver, suggesting investors are pricing in strong real growth.
2. Term premium risk
The 10-year U.S. term premium reached a 12-year high of 96 basis points this week in the New York Fed’s ACM model. Sharp increases can reflect concerns beyond growth and inflation, including doubts about central bank credibility or debt debasement, and a continued rise could end Wall Street’s rally.
