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Two Distinct Reasons for Higher 10yr Yields and How They Impact Risk Assets

Published on August 11, 2026

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Dennis DeBusschere

Kevin Brocks

Sophia Wang

DAILY STRATEGY: There have been two distinct reasons for 10yr increases over the past ~6 months. One was data indicating nominal demand is accelerating or much stronger than expected. That was the case last week (video on this HERE), which was associated with Risk-on equities and fundamental factors outperforming. Like, high earnings vol stocks, Value, GARP, Earnings Momentum and at the sector level, Cyclicals outperforming Defensives. The other reason 10yr yields have moved higher has been oil prices increasing. That has been associated with Low Earnigns Vol Stocks and Defensive sectors outperforming. Like yesterday.

As we have noted a few times, 10yr yields around current levels, driven by stronger growth and a higher economic speed limit (HERE), support risk assets. A 10yr well above 4.7% can become restrictive (HERE) but is not a problem for risk assets if nominal economic growth is close to 6%. 10yr yields above 4.7% might be needed to keep inflation expectations anchored in a 6% nominal GDP growth world with +27% 2026 S&P 500 EPS growth. A 1y0yr yield well above 4.7%, associated with Strait of Hormuz uncertainty/higher oil prices is a large headwind for risk assets.

We are comfortable with risk-on positioning over the medium term, even if oil prices remain in the $90-100 range. The rest of the world is likely to bear the brunt of the slowing of economic growth to help reduce the strain of higher oil prices (HERE). The US economy WOULD slow some as another energy shock would not be offset by tax refunds. But the US is not as energy sensitive as the rest of the world, so the impact should be limited. Unless oil prices move well above $110. Also, the lower end consumer is improving now! The lower end of the K if you will. According to PNC Bank internal data, the labor market has been a larger offset for the lower end consumer to the energy shock than tax refunds.

Additionally, as Jacob Kirgergard has noted, more oil than expected is finding its way onto the market (HERE). That should HELP limit the odds of an oil price surge – to say well above the $110 that would be terrible for our Risk On medium term view – assuming a significant escalation of the war is avoided.

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