Forget the slow bleed in stocks.
The more important story in the second Trump presidency has been the bond market, where long-term Treasury yields are again pushing toward levels that have rattled stocks before.
As RSM chief economist Joe Brusuelas said on Yahoo Finance’s Stocks in Translation in December 2024, “The stock market [was] the barometer of the first Trump administration. So, the bond market’s likely to be [that of] the second.”
With the US 30-year Treasury yield (^TYX) again nearing 5%, that call is back at the center of the market.
Here’s the technical backdrop: Since late 2022, the 30-year has been tracing a pennant pattern, a classic chart formation that often resolves in the direction of the prior trend — in this case, to the upside. That raises the risk of a definitive break above 5% — the important level that institutional money is watching.
In each of the four times the 30-year neared or broke above 5% in the past three years, stocks took a short-term hit, only to recover as yields quickly sank again, each time for different reasons.
The first such time was in October 2023. The 30-year rose to 5.15% as investors priced in the Federal Reserve keeping interest rates higher for longer, heavy Treasury supply, and weak auction demand. The S&P 500 (^GSPC) dropped about 6% but quickly rallied to new highs as cooler inflation data and a Fed pivot pushed yields lower.
Why are yields rising again?
Bond yields move in the opposite direction of bond prices, so higher yields mean bonds are being sold. At least for now, that means government bonds are not behaving like the classic flight-to-safety haven they often are during geopolitical shocks.
Read more: What is the 10-year Treasury note, and how does it affect your finances?
One useful way to think about Treasury yields is as the sum of two parts: expected inflation and a “real” yield, or the return investors demand after inflation.
In market terms, expected inflation is often estimated using so-called breakeven yields, while Treasury Inflation-Protected Securities (TIPS) yields are commonly used as the market’s real yield measure. That method of analysis is not perfect in the real world, but it is a useful framework.
Right now, both parts have been heading higher in March. Breakeven yields have risen as higher energy prices feed inflation worries. But real yields have also moved up by a similar amount, which tells us that this is not just an inflation story.
Investors are also demanding more compensation to own long-dated government debt. That extra compensation is often described as the term premium — essentially, the added yield buyers want for tying up money over a long period when inflation, supply, and policy all feel more uncertain.
