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What does a higher US Government 10-Year Yield mean for S&P 500 stocks?

Oct 05, 2018

  • The US Treasury 10-Year Bond Yield rose above 3.2% yesterday, causing a sell-off in US stocks
  • We decided to look at the relationship between the S&P 500’s performance and the US 10-Year Treasury Bond yield over the last 20 years to determine the relationship between yields and stocks valuations
  • As part of our study, we calculate the correlation between the S&P 500 and the US 10-Year Treasury Bond yield for 2018 alone.  
  • The S&P 500’s low in early 2009 was followed by a spike in the US 10-Year Treasury Bond yields as investors fled from equities to safer investments like government debt.  
  • The S&P 500 is trading at historic highs while US 10-Year Treasury Bond yields are just off 20-year lows set in 2016
  •  While rolling 1-month correlations have been volatile this year, the rolling 3-month correlation has been in a tight band of 0.2 to 0.4 -- this suggests that it may be a false assumption that stocks will continue to sell-off if US treasury yields continue to edge up

Source: Capital IQ

      Source: Capital IQ