We have seen much commentary that if US 10y yields go back to 2.5% or 3.0%, then equity markets suffer. We prefer a different way to looking at the problem. The key is what inflation is doing alongside any move in nominal yields. The below chart shows the % of the US yield curve trading below inflation. We highlight in green the periods when more than 50% of the yield curve is trading below inflation (as is the case today).
The Importance of Equity Duration
The Importance of Equity Duration
The Importance of Equity Duration
We have seen much commentary that if US 10y yields go back to 2.5% or 3.0%, then equity markets suffer. We prefer a different way to looking at the problem. The key is what inflation is doing alongside any move in nominal yields. The below chart shows the % of the US yield curve trading below inflation. We highlight in green the periods when more than 50% of the yield curve is trading below inflation (as is the case today).