Bond Yields at 15-Month Highs, $171B in Student Loan Defaults, and an Equity Market Still Calling Itself Greedy

If you read the positioning piece earlier today, you saw that institutions are hedging while staying long mega-caps. The reason for that behaviour lives in the macroeconomic data. Bond yields are rising to levels that historically force a repricing of every other asset class. The economic signals underneath the surface are flashing warnings that the equity market has not yet fully absorbed. This post builds that picture.

The US 10-year Treasury yield closed at 4.63% on Sunday night — the highest reading since February 2025. To put that in context: in April 2025, when the 10-year hit these levels, President Trump announced his 90-day tariff pause. The yield alone was enough to force a policy pivot. Now the yield is back, and we are four basis points above that same level.

The Kobeissi Letter flagged this overnight: “It is Sunday night and the US 10Y Note Yield just casually hit 4.63%, the highest since February 2025. We are now approximately 4 basis points above the high that prompted President Trump’s 90-day tariff pause in April 2025.”

That framing matters because it sets a precedent. The bond market knows what this level did last time. If yields hold here or push higher — toward 4.70-4.75% — the question becomes whether any policy response is forthcoming. Without one, the cost of capital across the economy rises, and the equity multiple that everyone is currently paying begins to look stretched.

In a normal risk-off environment, when US yields rise sharply, the dollar strengthens. Capital flows into higher-yielding US assets and buys dollars to do so. That is not what is happening. The dollar index is at 98.96, down 0.32% on the day, even as the 10-year sits at 4.63%.

This divergence is a signal, not an anomaly. The market is telling you that the yield rise is not attracting foreign capital — it is being driven by domestic selling of Treasuries rather than foreign demand. When bond prices fall because holders are selling rather than because new buyers want higher rates, the interpretation is materially different. It suggests fiscal concern rather than growth optimism.

During the London session, the DAX and European banks sold off in sympathy with bund yields rising. The dollar staying flat while European assets fell confirms that this is a rates story, not a traditional flight-to-quality story. Iran adds the geopolitical pressure on top, but the rate repricing was happening independently of it.

The equity market at 7,403 on the S&P 500 is calling itself in “greed” territory. The bond market at 4.63% is telling a different story. The economic data underneath supports the bond market’s version.

Student loan defaults have reached a record $171.4 billion in delinquencies. That is not a headline number — it is a direct consumption drag. When borrowers default on student loans, it removes spending power from the economy’s primary growth engine. These are not wealthy households. These are middle-income earners whose disposable income is being consumed by debt service, and who are now failing to service it.

Freight costs are surging. Electricity prices are up 6.1% year-on-year. Together with the Iran-driven crude oil spike (which pushed above $107 during the Asian session), input costs across the economy are rising. That combination — rising input costs, falling consumer capacity to spend, and rising borrowing costs — is the definition of a stagflationary pressure point. The Fed cannot cut into this without stoking inflation further. They cannot hold without risking a credit event.

The macro picture is not entirely negative. Multiple trade deals were announced following the Trump-Xi meeting, including a US-China Board of Trade and Investment designed to manage the bilateral economic relationship. This provides a structural floor under sentiment. Trade tensions were the primary driver of market volatility through 2025, and any genuine de-escalation removes a persistent drag on global growth expectations.

The ECB’s Philip Lane spoke during the London session. With bund yields rising in sympathy with US rates, any reluctance from European central bankers to signal further cuts amplifies the rates repricing globally. The Bank of England faces a similar bind — cutting into an inflation environment risks credibility; holding risks growth. Sterling at 1.3400 (+0.33%) suggests the market is not pricing an imminent BoE move in either direction.

The US Empire State manufacturing survey at 13:30 London time is the week’s first hard data point. Manufacturing sentiment will give the first read on whether the trade deal optimism is translating into business confidence, or whether the yield and Iran backdrop is overwhelming the positive trade news.

This content is for informational and educational purposes only. It does not constitute financial advice. Economic data is subject to revision. Always apply your own risk management.