SPY near record highs as yields rise
Rising U.S. bond yields and a fast-unwinding yen carry trade are the bigger macro risk, even as U.S. equities continue to absorb the shock and trade near all-time highs.
The 10-year Treasury yield has climbed to 4.74%, its highest level in the latest tape, while the 2-year sits at 4.19% and the curve has steepened to 50 basis points. That keeps borrowing costs elevated across the economy and raises the discount rate on future corporate earnings, a headwind for richly valued stocks and leveraged balance sheets.
The move in yields matters beyond the bond market. A higher U.S. rate backdrop strengthens the dollar's carry advantage and complicates a longstanding trade in which investors borrow in yen at near-zero rates to buy higher-yielding assets abroad. When that funding trade comes under pressure, it can force de-risking in everything from equities to emerging markets and volatility-sensitive strategies.
Stocks have so far shrugged it off. SPY closed at 765.72 on Aug. 21, after touching 769.06 two sessions earlier, leaving the ETF near record territory and well above its 50-day moving average of 751.56 and 200-day average of 704.98. Technical readings remain constructive, with RSI at 57.6 and the fund still trading below its upper Bollinger Band, suggesting momentum has cooled but not cracked.
The market's resilience matters for investors because it shows how far risk appetite has been powered by AI enthusiasm and still-solid growth expectations. But it also leaves the index exposed if rates keep climbing: higher yields can compress equity multiples, pressure rate-sensitive sectors and expose stretched positions that have benefited from cheap funding.
Adalytica's U.S. dollar trade signals show extreme fear at 3, while awareness remains at 100, underscoring how quickly positioning can reverse in crowded currency trades. Adalytica's Treasury bond signals also show extreme fear at 2, a warning that the bond market is not yet seeing a durable safe-haven bid despite the recent move higher in yields.
The key question now is whether equities can keep ignoring the tightening in financial conditions. If the 10-year yield stays near current levels or pushes higher, investors are likely to watch for pressure in high-duration growth stocks, carry-trade funded bets and any signs that a broader unwind is spilling into credit and global risk assets.
| Entity | Gains | Losses |
|---|---|---|
| Banks and cash lenders | ▲Higher net interest income | ▼Funding stress if volatility rises |
| Equity bulls | ▲Momentum and AI-led bid | ▼Multiple compression risk |
| Treasury buyers | ▲Better yields on new debt | ▼Existing bond prices |
| Yen carry traders | ▲Cheap funding and leverage | ▼Forced deleveraging |