The U.S. 30-year Treasury yield rose to 5.33% on Aug. 18, its highest level since June 2007. The 10-year Treasury yield also moved up to near 4.75%, marking another high point since January this year. On the same day, all four major U.S. stock indexes closed lower, with the jump in yields seen as one of the pressures on equities.
BlockTempo reviewed public data from the Federal Reserve Economic Data database, or FRED, to test how the S&P 500 performed after Treasury yields broke above their highest level of the previous 36 months. The analysis used 10-year Treasury data going back to 1962 and 30-year Treasury data across the past four decades, then compared those signals with monthly S&P 500 returns.
S&P 500 tended to struggle in the first three months after a breakout in yields
The signal definition in the report was straightforward: when the month-end yield first moved above its highest level of the prior 36 months, the study tracked the S&P 500’s actual returns three, six, and 12 months later.
Using that rule, the 10-year Treasury yield generated 10 signals since 1985. Those cases included the 1994 bond market selloff, when the yield reached 7.62%, the four separate breakouts in 2018, the 2022 rate-hike cycle, and the episode in September 2023 when the 10-year yield briefly approached 5%.
The short-term results were weaker than the broader baseline. Three months after those 10-year signals, the S&P 500 posted an average return of -1.1%. Seven of the 10 cases were down, compared with a full-period benchmark of +2.5%.
The 12-month picture looked very different. Nine of the 10 cases ended higher, with an average return of +11.8%, close to the +10.6% benchmark. The only sample that was still negative after 12 months came from January 2018. In that case, the 10-year yield was only 2.72%, and the period was later hit by the U.S.-China trade war and the fourth-quarter equity selloff, which the article described as a special case tied to a simultaneous deterioration in fundamentals.
For 30-year Treasuries, completed samples all showed gains after 12 months
The report said the current market is paying closer attention to the 30-year Treasury yield. Since 1985, that series has produced only six signals in which the yield set a new three-year high. July 2026 was identified as the sixth and current live sample.
The five completed cases were logged in February 2018, September 2018, April 2022, August 2022, and September 2023.
Across those five observations, the S&P 500 returned an average of 0.0% after three months, with three declines. The sharpest drop followed the September 2018 signal, when the index fell 14% over the next three months during the fourth-quarter stock selloff that year.
At the 12-month mark, all five completed 30-year yield cases were positive. The average return was +10.8%, with no exceptions.
BlockTempo highlighted September 2023 as one of the clearest examples. At that time, the 10-year Treasury yield briefly touched 5% and bearish views were widespread, yet the S&P 500 was up 34.4% a year later. The article said the most common pattern behind these one-year gains was a peak and pullback in yields, followed by capital rotating back into equities.
Record-high federal debt by itself showed little forecasting value
The article also tested whether new highs in total U.S. federal debt worked as a useful warning signal for stocks.
Since 1985, 144 of 163 quarters, or 88%, saw total federal debt reach a new high. In the 12 months after those quarters, the S&P 500 delivered an average return of +11.3%, and the probability of a decline was only 15%. That was actually better than the +4.5% average return recorded after quarters that did not set a new debt high, a group that the article said was concentrated around the dot-com bust in 2000.
On that basis, the report argued that debt hitting new highs is more of a normal condition than a useful market signal. Yield behavior itself carried more value than the debt total alone.
Why yields are rising may matter more than the historical average
Combining the 10-year and 30-year Treasury cases, the article counted 15 completed samples. About two-thirds of them saw the S&P 500 decline over the following three months, and the largest drop reached 14%. Over a 12-month horizon, only one sample ended lower and the average gain was about 11%.
The report added an important condition to that historical pattern: the reason yields are moving higher can shape how stocks respond.
Citing Yahoo Finance, the article said equities have generally held up when rising yields were tied to economic growth. The setup was less friendly for stocks when yields were driven by inflation pressure or fiscal concerns. In the current episode, with the 30-year yield at 5.3%, the article said the move was mainly linked to market concern over uncontrolled fiscal deficits pushing up the term premium, rather than simple optimism on growth. That, in its view, places the current case in a less supportive category for equities than the historical average alone might suggest.
The article also referred to analysis from Investing.com, which found that when the 10-year Treasury yield stays above 4.3%, the three-month correlation between stocks and bonds turns negative. In other words, if yields keep rising, the chance of near-term pressure on stocks may be higher than the long-run average. With the 10-year yield near 4.75%, the market is already above that threshold.
CNBC reported on Aug. 18 that the latest surge in yields has also occurred alongside heavy debt issuance from technology companies competing for market demand, adding to supply pressure that may not ease quickly.
Historical readout points to near-term volatility and stronger longer-term outcomes
Taking the data together, the article’s main read was that market volatility over the next three months would be the more likely outcome. It added that if the 30-year Treasury yield remains above 5.3%, the negative stock-bond relationship could deepen further in the short run.
If yields peak and then retreat over the coming months, however, the path could look closer to what followed the 10-year yield’s move to 5% in 2023. In that case, the report said, the odds of money moving back into equities would not be low, and the stronger 12-month historical pattern could continue.