Investors are increasingly come around to the higher-for-longer mantra
The fate of an early year rally in stocks may depend on whether equities can withstand a recent rise in U.S. Treasury yields, as investors increasingly come around to the Federal Reserve’s higher-for-longer mantra on interest rates.
On Tuesday, rising yields did not appear to undermine the appetite for stocks. The S&P 500 rose 1.3% along with a 6 basis points rise in the 10-year U.S. benchmark Treasury yield . The yield on the benchmark 10-year Treasury note has increased nearly 30 basis points to 3.69% since last Wednesday. The yield on the two-year U.S. note gained almost 40 basis points to 4.47% since last Thursday.
The current premium coincides with a 12-month excess return of 3.5% for the S&P 500 over the 10-year Treasury note, but the premium has fallen closer to a level that would suggest a more diminished return, according to Lerner.
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