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Ten-year Treasury yield catching up to S&P 500 dividend

A historically hefty advantage that the S&P 500 dividend yield has held over the benchmark U.S. Treasury note is on the verge of disappearing, a year after the collapse in interest rates set the stage for Wall Street’s recovery from the pandemic sell-off.

Investor concerns that measures to restore a U.S. economy hammered by the global pandemic could also spark inflation lifted the yield on the 10-year note as high as 1.394% overnight, the highest since February 2020. The yield was last at 1.365% late on Monday.

That compares with the S&P 500’s dividend yield of about 1.46%, according to Refinitiv’s Datastream. That yield has gradually declined as the index hit record highs for the past several months, fueled by low interest rates that have made stocks more attractive.

Treasury yields have moved steadily higher in recent weeks as Democrats push a $1.9 trillion coronavirus relief package through Congress, spending that is viewed by many as necessary to boost the economy, but also seen as potentially stirring inflation as the country begins to recover. The Fed’s ongoing loose monetary policy also has some investors worried about inflation.

Reference: Reuters