S&P 500 vs 10Y Treasury Yield
SPY (SPDR S&P 500 ETF) tracks the cap-weighted S&P 500 with current price $708. The 10-year Treasury yield (FRED DGS10) sits at 4.31 percent.
Also known as: S&P 500 ETF (SPY) (ETF_SPY, S&P 500, SPX, SP500) · 10Y Treasury Yield (10Y yield, 10 year treasury, TNX)
Why This Comparison Matters
SPY (SPDR S&P 500 ETF) tracks the cap-weighted S&P 500 with current price $708. The 10-year Treasury yield (FRED DGS10) sits at 4.31 percent. The stock-bond correlation has evolved. From 2000-2021: stocks and bonds typically moved inversely (stocks up, yields down). Post-2022: stocks and yields often rise together as markets focus on growth rather than duration. SPY forward earnings yield (1/22) approximately 4.5 percent; 10Y Treasury 4.31 percent. Equity risk premium (ERP) compressed to ~20 basis points (April 2026), well below 200-300bp historical norm. The compressed ERP reflects AI capex multiple expansion + persistent Fed restrictive policy. SPY/10Y relationship critical for asset allocation regime.
The April 2026 Configuration
SPY $708 (April 24 2026, YTD -2.5% from January 2026 levels). 10Y Treasury yield 4.31 percent. SPY forward P/E approximately 22x; forward earnings yield 4.5 percent. 10Y Treasury yield 4.31 percent. Equity risk premium (forward earnings yield minus 10Y) approximately 20bp.
Equity risk premium of 20bp is among lowest readings since 2007 (peak ERP compression preceded GFC). Historical ERP averages 200-300bp. Compressed ERP reflects AI capex multiple expansion (SPY P/E rose from 19x to 22x in 2024-2025) combined with elevated 10Y (4-5% range).
SPY YTD performance: -2.5% from start of 2026 reflecting Iran war drag (peaked $720+ early 2026, fell to $688 lows in March/April). Recovered to $708 as ceasefire stabilized.
10Y in 4-4.5% range through 2024-2026. Term premium expanded; fiscal trajectory concerns; persistent inflation (core CPI 2.6%, supercore 4%, Michigan 5-year 3.5%). Fed paused at 3.50-3.75% since December 2024.
The combined April 2026 reading: stocks and bonds both elevated. Compressed ERP suggests stretched valuation. AI capex narrative + Fed restrictive policy creates unusual configuration.
The Evolution of Stock-Bond Correlation
Stock-bond correlation has evolved across regimes.
1980-2000 era: positive correlation. Both moved together with inflation regime. Volcker disinflation lifted both stocks and bonds.
2000-2021 era: negative correlation. Classic 60/40 portfolio era. Stocks up, yields down (and vice versa). Disinflation + Fed put + low inflation expectations.
2022-present era: positive correlation re-emerged. Stocks and yields often rise together. Drivers: (1) inflation regime re-anchored above 2%; (2) AI capex narrative supports stocks despite higher rates; (3) fiscal trajectory concerns push both yields and equity multiples; (4) global liquidity dynamics.
The practical implication: 60/40 portfolio diversification benefit weakened post-2022. Both stocks and bonds can fall together (2022 era) or rise together (2024-2026). Dynamic correlation requires rebalancing frequency increase.
60-day rolling correlation between SPY returns and 10Y yield changes: 2000-2021 typically -0.30 to -0.45 (negative). 2022-2026 swung between +0.30 to -0.30 (variable). April 2026 approximately +0.10 (modest positive).
Conditional Forward Response (Tail Events)
How 10Y Treasury Yield has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in S&P 500 ETF (SPY). Computed from 1,237 aligned daily observations ending .
Following these triggers, 10Y Treasury Yield rises 0.54% on average over the next 5 sessions, versus an unconditional baseline of +0.63%. 124 qualifying events; 10Y Treasury Yield closed positive in 51% of them.
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Frequently Asked Questions
What are SPY and the 10Y Treasury yield?+
SPY (SPDR S&P 500 ETF) tracks cap-weighted S&P 500 with current price $708 (April 24 2026, YTD -2.5%). 10-year Treasury yield (FRED DGS10) 4.31% April 2026. SPY forward P/E ~22x; forward earnings yield 4.5%. Equity Risk Premium (ERP) ~20bp (compressed near record lows). Historical ERP averages 200-300bp. SPY YTD -2.5% reflects Iran war drag (peaked $720+ early 2026, fell to $688 lows March/April). Recovered to $708 as ceasefire stabilized. 10Y in 4-4.5% range through 2024-2026 (term premium expansion, fiscal trajectory concerns, persistent inflation core CPI 2.6%, supercore 4%, Michigan 5-year 3.5%). Fed paused 3.50-3.75% since December 2024.
How has stock-bond correlation evolved?+
1980-2000 era: positive correlation. Inflation regime with both moving together. Volcker disinflation lifted both. 2000-2021 era: negative correlation. Classic 60/40 portfolio era. Stocks up, yields down (and vice versa). Disinflation + Fed put + low inflation expectations. 2022-present era: positive correlation re-emerged. Stocks and yields often rise together. Drivers: inflation regime re-anchored above 2%; AI capex narrative supports stocks despite higher rates; fiscal trajectory concerns push both; global liquidity dynamics. 60/40 portfolio diversification benefit weakened post-2022. 60-day correlation: 2000-2021 -0.30 to -0.45 (negative); 2022-2026 +0.30 to -0.30 (variable). April 2026 ~+0.10 (modest positive).
What is the Equity Risk Premium?+
ERP = forward earnings yield minus 10Y Treasury yield. April 2026: SPY forward P/E 22x = forward earnings yield 4.5%. 10Y 4.31%. ERP = 4.5% - 4.31% = 0.19% (19bp). Historical norms: 200-300bp average over multi-decade history. Compressed ERP signals stretched equity valuation. ERP compression history: 2007 pre-GFC ERP near zero (peak compression). 2008 crash followed. 2000 dot-com peak: ERP -100 to -200bp negative. Crash followed. 2024-2026: ERP compressed 0-50bp. AI capex narrative driving multiple expansion. Normalization paths: P/E 22x to 18-20x lifts ERP to 100-200bp (SPY -10-20%); 10Y 4.31% to 3.5% lifts ERP to 100bp (Treasury rally bullish SPY); earnings +15-20% EPS lifts ERP through numerator.
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