Treasury Yields Slide as Investors Swap Stocks for the Safety of Bonds

Treasury yields and stocks are falling together, a combination that breaks the usual pattern in which lower yields cushion equity markets. The Nasdaq 100 dropped roughly 6.5% from open to low across two weeks, while the benchmark 10-year U.S. Treasury yield slipped back below a closely watched threshold despite a heavy pipeline of government bond supply. Rather than a relief rally, the bid for Treasuries points to capital leaving stretched stocks for the relative safety of bonds. Elevated oil prices and an upcoming Federal Reserve rate decision under Chair Kevin Warsh add to the pressure on both markets.

James Stanley, StoneX Media Senior Market Analyst, has spent more than two decades working across equities, options, fixed income and foreign exchange. He analyzes price action and macroeconomic drivers through an event-driven lens on medium-term time frames, tracking how central bank decisions and inflation data move bonds, stocks and currencies.

Key Themes

• The 10-year U.S. Treasury yield slipped below a key threshold despite heavy upcoming government bond supply.
• Lower Treasury yields are arriving with lower stock prices, pointing to capital rotating out of equities.
• Federal Reserve rate decisions alone do not dictate where long-term Treasury yields go.

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Treasury Demand Holds Firm Despite Heavy Government Bond Supply

"What initially was a pullback has started to take on the life of a rally in bonds," Stanley says of the benchmark 10-year U.S. Treasury note. U.S. Treasury buyers pushed the 10-year yield back below a closely watched level even with a large wave of government bond supply set to come to market. Demand of that strength, against rising supply, signals investors bracing for "something that could possibly turn into something larger" than a routine pullback. The bond market is therefore sending a more cautious message than headline equity levels alone suggest. Traders watching only stock prices risk missing the warning embedded in Treasury demand.

Treasury Buying Pulls Capital Out of Stretched U.S. Stocks

Lower Treasury yields are arriving alongside lower U.S. stock prices, a sign that money flowing into bonds is being drawn out of equities. The Nasdaq 100 fell 2.88% in a single session, and equities still look rich from many valuation perspectives. According to Stanley, "I'm still of the mind that lower yields go along with lower stock prices because that capital to be buying bonds has to come from somewhere." Unprofitable AI companies sit at the sharp end of this rotation, since they "lean on and rely on debt markets" to keep operating. Any rise in borrowing costs consequently lands hardest on the most leveraged corners of the Nasdaq 100.

Federal Reserve Rate Decisions Do Not Dictate Treasury Yields

The Federal Reserve controls the short-term federal funds rate, whereas long-term U.S. Treasury yields respond to inflation expectations and the wider macro backdrop. When the Federal Reserve began cutting rates in 2024, Treasury yields climbed sharply because inflation was already elevated and investors expected it to rise further. That episode undercuts the common assumption that rate hikes automatically lift yields and rate cuts automatically lower them. For bond traders, oil-driven inflation and risk appetite can outweigh Kevin Warsh's decision itself. "You could see Treasury yields go up when the Fed is cutting. You can see them go down when they're hiking," Stanley explains.

--- Written by Frédéric Guétin, StoneX Media Producer

--- Expert: James Stanley, StoneX Media Senior Market Analyst