US Treasury Outlook: Will the Correlation Between Stocks and Bonds Return?

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智通财经2026/09/15 12:06

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Before major central bank meetings, medium-term government bonds led yields to multi-decade highs, and the situation may become even more complicated.
Bond market sell-off, led by Japanese government bonds, has resumed. Japanese government bond yields reached the highest level in decades, and the US 10-year Treasury yield climbed to its highest since 2007.
The Federal Reserve and Bank of Japan will announce their rate decisions on Wednesday and Friday, respectively. The market expects both to raise rates by 25 basis points.
Japan's ruling party and Prime Minister finalized a plan to cut the consumption tax and provide household subsidies without detailing the funding sources. The finance minister stated that funding would be sourced by reviewing expenditures and revenues.
Japanese government bonds were unmoved by this; 20-year and 30-year yields closed up by 7 basis points and 8.5 basis points, respectively, and the 10-year yield briefly touched 3.035%, the highest level in 30 years.
The yen weakened 0.3% against the US dollar to 154.81.
The US Treasury Secretary announced increased buybacks of 10- to 30-year Treasuries for the remainder of this quarter; meanwhile, there are reports the UK may halt long-dated bond sales, and Europe faces challenges financing defense and infrastructure spending.
The Central Bank of Norway previously announced it would reduce its bond allocation from 70% to 50%, forcing long-term bond investors to reassess.
Bonds have traditionally served as risk diversifiers due to a negative correlation with stocks. However, recently, high yields are weighing on growth stocks, causing simultaneous declines in both stocks and bonds and worsening portfolio performance.
If the recent performance is not only about inflation but also driven by concerns over debt sustainability, the stock-bond correlation may converge. However, if high rates trigger a recession and force central banks to cut rates, the certainty of this scenario diminishes.
It's reasonable to question the role of bonds as a risk diversification tool and to also consider inflation-protected bonds, short-duration bonds, and other assets.
On the day, long-end US Treasury yields rose 2 to 5 basis points. The 10-year yield fluctuated in the 4.98% to 5.04% range. Tactically, there is an inclination to buy duration when the 10-year yield reaches 5% or above.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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US Treasury Outlook: Will the Correlation Between Stocks and Bonds Return?

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