Why stocks haven’t tanked despite higher bond yields: Chart of the Day

The benchmark 10-year Treasury yield climbed to 4.97% late Thursday according to Business Insider reporting, capping a monthslong bond sell-off driven by higher oil prices, sticky inflation, heavy government borrowing, and expectations that the Federal Reserve will maintain higher interest rates for longer. Simultaneously, the 30-year Treasury bond yield climbed above 5.23%, while the 2-year Treasury note yield rose to 4.20% as reported by CNBC. These moves followed a decision by the U.S. Treasury, announced by Treasury Secretary Scott Bessent, to more than double the size of its government debt repurchases starting September 9 and running through November 4. Bessent noted that the debt buyback program could exceed its initial $4 billion upper limit.

TS Lombard Economists Explain Why Rising Yields Aren’t an Equity Killer

Despite debt market pressures and global bond yields hitting multidecade highs, equity markets have absorbed the shifts without a severe correction. Analysts at TS Lombard argue that the current yield spike differs fundamentally from previous cycles.

The economists noted in a research note that the recent ascent in yields stems primarily from supply shocks and structural changes in the Treasury market rather than a traditional overheating economy. Furthermore, the artificial intelligence spending boom has acted as a primary stabilizer for corporate equities. Corporations continue to pour capital into data centers and AI infrastructure, creating a continuous cycle of investment demand.

CFRA Strategy and the Speed of Yield Movements

Market strategists emphasize that the velocity of rate changes often matters more than the absolute level of yields. CFRA noted that the 10-year Treasury yield has averaged 4.4% in 2026, compared to 4.3% in 2025 and 4.2% in 2024.

Sundaram added that historically, it is the speed of the move in yields, not the absolute level, that tends to cause the most damage. While major stock averages headed for a losing week, declines remained modest because strong corporate earnings left investors confident in future returns.

Corporate Borrowing Costs and Alternative Capital Strategies

Higher capital costs carry tangible consequences for corporate bottom lines. Businesses spending freely on infrastructure face compressed free cash flow and narrowing profit margins over time. Alphabet shares previously tumbled after Google’s parent company posted negative free cash flow for the first time since going public in 2004.

These elevated borrowing expenses could push corporations toward alternative methods of raising capital. Jessica Inskip, director of investor research at StockBrokers.com, explained that firms might favor selling equity over issuing new debt, creating potential shareholder dilution that could weigh further on equities.

Fixed Income Competition and Safe-Haven Asset Rotation

As bond yields continue to climb, fixed-income instruments present an increasingly attractive alternative to riskier equities, drawing cash away from the stock market. Commodity markets have emerged as major beneficiaries of this macroeconomic uncertainty. Gold, copper, and other raw metals rallied following the U.S. Treasury’s liquidity announcement. Bitcoin also surged 11% over a two-day period, supported by safe-haven demand and ongoing industry legislative pushes.

Freedom Capital Markets chief market strategist Jay Woods pointed to copper producer Freeport-McMoRan as an example of a commodity-tied stock positioned to break out, noting that shares have climbed more than 16% over the preceding three months.

TS Lombard warns that investors should monitor credit and leverage accumulation closely, noting that a 10-year yield should be at least 5% in the prevailing economic environment, leaving equities with narrow justification if bond returns remain elevated.