Jefferies Warns 2.36% 10-Year TIPS Yield Threatens Stocks as Real Rates Stay Near 2.5%
Updated
Updated · CNBC · Aug 13
Jefferies Warns 2.36% 10-Year TIPS Yield Threatens Stocks as Real Rates Stay Near 2.5%
2 articles · Updated · CNBC · Aug 13
Summary
A 2.36% 10-year TIPS yield is flashing a bearish signal for equities, with Jefferies saying stock returns have historically weakened once real yields move above 2%.
Jefferies' 30-year analysis found the S&P 500 averaged just 0.2% monthly gains when TIPS sat in the 70th to 100th percentile; Japan lost 0.5% a month, while Latin America gained 0.3%.
Real yields may stay elevated because fiscal risk is lifting the term premium and AI-driven borrowing is keeping long-duration funding costs high, Jefferies said.
A $432.3 billion U.S. budget deficit in July and projected 28% global capex growth in 2026 underpin that view, while a more hands-off Warsh-led Fed could leave inflation and deficit pressures less restrained.
In that backdrop, Jefferies favors quality and yield, highlighting software, financial services and discretionary retail, with JPMorgan Chase, Pfizer, ConocoPhillips, McKesson and Dollar Tree among screened picks.