When yields rise, stocks now fall. But inflation expectations have not moved

The 90-day correlation between the 10-year Treasury yield and the S&P 500 has fallen to -0.48. That is the most negative reading since 1999, below even the -0.42 low of the 2022 bear market.

Why yields and stocks now move apart

A correlation is a single number between -1 and 1 that measures how closely two things move together. At 1 they always move in the same direction, at -1 always in opposite directions, and at 0 they have nothing to do with each other. For more than a decade before 2020 this number was positive. Rising yields signalled a stronger economy, and a stronger economy meant companies earned more, so share prices rose alongside them. That link has broken. Today, when yields rise stocks give way, and when yields fall stocks hold up. August 4 in New York looked exactly like that: the S&P 500 closed at a record 7,736.52 while the 10-year yield slipped to 4.6%.

Breakeven inflation has not moved from 2.2%

The Kobeissi Letter names inflation uncertainty and fiscal concerns side by side as the cause. The numbers we pulled ourselves say the two do not carry equal weight. The nominal 10-year yield was 4.7% as of August 3. It splits into two pieces: what the market expects prices to do, and what money itself costs once inflation is stripped out. The first is called breakeven inflation, the second the real yield. Breakeven inflation sat at 2.2% on August 4, close enough to the Fed's 2% target, while the real yield was 2.4%. Price expectations are quiet; money itself has become expensive. The two readings come from different days, so they do not add exactly to the nominal yield.

The number Treasury published on August 3

On August 3 the Treasury said it expects to borrow $739 billion in privately held net marketable debt this quarter. That is $68 billion more than it projected in May, and Treasury attributed the increase to lower projected net cash flows. The fourth-quarter estimate is $628 billion.

Treasury Announces Marketable Borrowing Estimates (U.S. Treasury, 2026-08-03)

출처: home.treasury.gov

More borrowing means more paper to sell. The first box in the chain above now has an actual figure attached to it. The budget is not the whole story, though. Investment Research Partners wrote on August 4 that it remains unsettled whether the move in yields reflects lost Fed credibility, inflation expectations, fiscal strain, or hyperscaler debt issuance. In plain terms, the big technology firms financing AI data centres are queuing for the same money as the government.

The Dashboard - August 2026 (Investment Research Partners, 2026-08-04)

출처: investmentresearchpartners.com

August 12 inflation data and the September FOMC

If breakeven inflation breaks out of the 2.2% area, the Kobeissi reading holds. If it stays put while yields keep climbing, this is a story about deficits and supply from beginning to end. The two cases hit equities differently: in the first, earnings themselves shrink; in the second, earnings hold but the yardstick that converts them into a share price gets stricter.