10-Year Treasury Yield Tops S&P 500 Earnings Yield in Rare Comparison
The comparison gives bonds their strongest relative advantage over stocks in about 25 years as investors reassess Treasury yields above 5%.
The 10-year U.S. Treasury yield has risen above 5%, surpassing the S&P 500’s earnings yield and giving bonds their strongest relative advantage over stocks in about 25 years.
The earnings yield is the inverse of the S&P 500’s price-to-earnings ratio. The comparison means Treasurys currently offer a higher yield than the earnings yield implied by stock valuations, although the two measures represent different types of returns.
The move comes as Treasury yields above 5% reflect continued resilience in the U.S. economy. At the same time, higher yields place greater demands on stock valuations and corporate earnings expectations.
Investors who previously positioned for long-term Treasury gains have faced losses as bond prices fell. With the 10-year yield above 5%, Treasurys are again prompting a reassessment of their role in portfolios.
