Everyone is looking for the ultimate signal that says when yields are about to peak. In 2000, the 10-year yield peaked early in the year, and the stock market followed with its own peak in March. In 2007, the 10-year peaked around mid-year and the S&P 500 topped out in October. In 1981, yields peaked near 16% and stocks didn't top, they bottomed within a year and started one of the longest bull markets in history. That's the Volcker-era story we covered earlier.
Where that leaves us today
On one side, September payrolls came in at just 29,000, every estimate in Bloomberg's survey was missed, unemployment edged up, and prior months were revised lower. That looks more like 2000 or 2007. On the other side, inflation worries haven't gone away: oil topped $100 a barrel in September amid tariff and geopolitical concerns. Even the Treasury's decision to triple its long-dated buybacks failed to stop yields from rising.
"Everything gets sold" isn't how credit events treat Treasuries
In 2008, a genuine credit event, Treasuries rallied hard while high yield spreads blew out to roughly 20 percentage points over Treasuries. The assets that got hit were the ones carrying credit risk, not the government bonds. The one exception was March 2020, when even Treasuries sold off briefly in a scramble for cash because leveraged basis trades were being unwound, which is the exact vulnerability we flagged when we covered the record Cayman Islands bill holdings. The Fed had to step in. So a credit event isn't everything declining simultaneously, the type of bond you own determines which side of it you land on.
What this could mean for fixed income investors
If you believe yields are near a peak, quality duration is the way to express it. The TLT return table showed how asymmetric the payoff gets if yields fall. Building a position gradually through a ladder or barbell beats trying to time a top that, as the history above shows, usually only looks obvious afterward.
Be careful about reaching for yield in credit. High yield, leveraged loans, and private credit vehicles tend to suffer while Treasuries tend to do the protecting.
Watch credit spreads, not just Treasury yields. Spreads widening is the earliest warning that a credit problem is developing, and it often shows up before stocks fully react. We are seeing flashes of that in companies related to the enormous AI buildout as worries grow around the sustainability of AI growth and companies may not see the payback that many had hoped.
Keep some dry powder in T-bills. Liquidity matters when forced selling hits, and bills give you somewhere to stand if prices dislocate.
The bottom line
Right now the data is pointing in both directions at once, which is exactly the situation where confident calls deserve the most skepticism. For fixed income investors, the safer takeaway isn't to bet on the sequence, it's to build a portfolio that doesn't need it to be right: quality duration in measured pieces, disciplined exposure to credit, and enough liquidity that a credit event is something you can watch instead of something you have to survive.