The 10-year Treasury yield briefly touched 5.36% earlier this week, its highest level since 2002, after rising 112 basis points since the end of 2025.
- JPMorgan Asset Management’s Chief Market Strategist for the Americas, Gabriela Santos, said historically, there was a relatively clear relationship between Treasury yields and stocks.
- When yields were low and rising because of stronger economic growth, stocks generally benefited alongside them.
- Santos said that since mid-2021, the relationship between Treasury yields and stocks has become far less predictable, with correlations repeatedly moving between positive and negative.
Stocks have continued to hold up even as Treasury yields surge to levels that historically would have raised serious concerns for equities, prompting JPMorgan to question whether the market’s relationship with interest rates has fundamentally changed.
The 10-year Treasury yield briefly touched 5.36% earlier this week, its highest level since 2002, after rising 112 basis points since the end of 2025. The move has investors asking a familiar question: At what point do higher yields finally become a problem for stocks?
JPMorgan Says The Old Yield Threshold May Be Gone
Historically, there was a relatively clear relationship between Treasury yields and stocks, according to JPMorgan Asset Management’s Chief Market Strategist for the Americas, Gabriela Santos.
When yields were low and rising because of stronger economic growth, stocks generally benefited alongside them. But once yields crossed a certain threshold, the relationship flipped, with higher rates beginning to weigh on equities.
“Intuitively that makes a lot of sense,” Santos wrote.
She identified two distinct historical thresholds. From 1965 through late 2008, stocks and yields generally moved together until the 10-year Treasury reached about 4.5%.
From 2009 through mid-2021, that threshold fell to roughly 3.5%, reflecting a weaker-growth, lower-inflation environment.
But the post-2021 period looks very different. “The new new normal?” Santos asked.
Since mid-2021, the relationship between Treasury yields and stocks has become far less predictable, with correlations repeatedly moving between positive and negative. In other words, there may no longer be a single yield level that automatically signals trouble for equities, she noted.
The iShares 20+ Year Treasury Bond ETF (TLT) fell 0.02% in Friday’s after-hours session, while the iShares 7-10 Year Treasury Bond ETF (IEF) was flat.
AI May Be Changing How Stocks React To Rates
Santos believes part of the explanation lies in how dramatically the composition of the stock market has changed.
The 10 largest companies now account for roughly 40% of the S&P 500, according to Santos, and many of those companies are being driven less by traditional economic activity and more by the artificial intelligence investment boom.
That could help explain why stocks have remained resilient despite the sharp increase in borrowing costs.
While major technology companies have begun issuing debt to fund massive AI infrastructure spending, Santos does not believe higher rates at current levels are necessarily enough to derail their growth trajectory.
“The looser relationship between yields and stocks is also likely due to the changing nature of the market and its dominant earnings driver,” Santos wrote.
For now, the strategist says investors may need to watch something other than the 10-year yield itself.
“Bond yields and stocks may continue to beat to the sound of their own drum,” Santos wrote, with the most important drivers being “the AI capex boom, the ability of the hyperscalers to monetize that investment, and ultimately the adoption of that technology across sectors.”
That means the old question of how high can Treasury yields go before stocks break may no longer have the simple answer investors once expected, she added.
During the after-hours session on Friday, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was flat; the Invesco QQQ Trust ETF (QQQ) edged up by 0.01%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.02%. Retail sentiment on Stocktwits toward the S&P 500 ETF was in the ‘bullish’ territory at the time of writing.
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