Treasury yields and oil prices have started moving in opposite directions. Is it a signal that investors are bracing for a Fed policy mistake? One of this year’s most important relationships in global markets has started to unravel over the past couple of weeks.
Investors are scrambling to figure out what it might mean for the economy, and their portfolios. For months, as oil prices have risen, Treasury yields have followed higher mostly in lockstep. But that relationship started to weaken in August, as yields continued higher even as oil prices traded sideways.
And last week, it completely broke apart. Global oil prices briefly rose to $110 a barrel as a Houthi attack on an airport in Saudi Arabia stoked fears about further disruptions to global energy supplies. But instead of climbing, bond yields moved sharply lower, with the 10-year yield registering its biggest weekly drop since February.
That caused the 20-day rolling correlation between oil prices and Treasury yields to take a sharp turn lower, touching its lowest level since late 2024, according to an analysis from Dow Jones Market Data. The trend persisted on Monday. Crude-oil prices were falling, while Treasury yields climbed.
How to think of the 60/40 portfolio amid rising bond yields Play video: How to think of the 60/40 portfolio amid rising bond yields Last week also saw the Nasdaq Composite move lower as Treasury yields declined — another notable shift. Since mid-August, the tech-heavy Nasdaq had largely continued higher, even as rising yields appeared to put pressure on shares of companies believed to be more sensitive to higher rates. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it.
I would like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time. It might be a few weeks before investors have a clearer picture of what might be driving this, Colas said.
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