Bonds are slamming stocks just days after Wall Street set fresh records. A global bond selloff is now pushing borrowing costs to multi-decade highs.
The S&P 500 and Nasdaq Composite fell to two-week lows on Tuesday. In contrast, long-dated Treasury yields jumped to their highest levels in nearly two decades.
Records, Then a Reversal
The S&P 500 closed at a record 7,798.99 on Aug. 13. Cooling inflation data and strong AI-linked earnings had powered that rally.
The Dow Jones Industrial Average had also set an AI-earnings record close alongside the S&P 500 on Aug. 5. However, the mood flipped just days later.
The Nasdaq Composite slid to a two-week low as semiconductor stocks tumbled, denting a record-setting 2026 rally.
How Bonds Are Slamming Stocks
The US 10-year Treasury yield climbed to 4.748%, its highest since January 2025. The 30-year yield reached 5.33%, its highest level in 19 years.
The rout is not just American. Japan’s 10-year government bond yield reached a 30-year high of 2.945% this week.
The gap between short-term and long-term US yields is now the widest in four years. That steepening signals investors are demanding more compensation for long-run risk.
Renewed doubts over a Middle East peace deal pushed oil prices higher, fanning inflation fears. Meanwhile, a record wave of corporate bond issuance is competing with government debt for investor cash.
Issuance has totaled nearly $1.7 trillion so far in 2026, according to SIFMA data. That pace is on track to top last year’s record of $2.2 trillion.
A Moving Market is Worth a Look
Meanwhile, South Korea’s KOSPI fell 1.5% and Japan’s Nikkei dropped 2.5% in sympathy. The Philadelphia SE Semiconductor Index tumbled 5% as investors reassessed AI-linked valuations.
In contrast, the pullback lends weight to Fundstrat’s Tom Lee. He has said a 10% market correction may be needed before the S&P 500 can sustainably clear 8,000.
Wednesday’s Federal Reserve minutes may decide whether this pause holds or the selloff deepens. Investors are already positioning for that Fed minutes preview, the next major catalyst for both stocks and bonds.
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