Karishma Vanjani
Treasuries have taken a lot of flak from Wall Street in recent years, because they stopped behaving like a safe haven. When stocks tanked, Treasury prices have been following suit.
It's time to show some respect again, with Treasuries no longer moving in lockstep with stocks. The renewal of this classic relationship came just before geopolitical tensions in the Middle East this past week. Its re-establishment should trigger a big move into Treasuries after Saturday's attack on Iran by the U.S. and Israel.
Typically, when stocks slide, Treasury prices rise -- and vice versa. This see-saw effect, which protected portfolios for decades, broke in 2022, when the Federal Reserve started raising interest rates to fight inflation -- and both stocks and bond prices fell. Bonds also failed to provide protection against falling stocks in April, when President Donald Trump unveiled his "Liberation Day" tariffs.
Bonds have also taken a beating each time political pressure on Fed Chair Jerome Powell has ramped up, like in July of last year and January 2026.
However, the classic inverse relationship of bond prices gaining when stock prices fall is back on. "Stocks and bonds [are] currently showing the strongest inverse correlation since early-2021," wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, in a Friday note, referencing the recent performance of the Bloomberg US Treasury Index and the S&P 500. It's a return to "traditional" dynamics, he added.
Citi strategist Mike Chang wrote in a Friday note that "the correlation has normalized" between stocks and bond yields in the wake of Trump nominating Kevin Warsh to serve as the next Fed Chair, as well as the Supreme Court ruling against Trump's IEEPA tariffs.
The S&P 500 slipped 0.9% in February while Treasury prices gained, and the yield on the 10-year note marked its biggest monthly drop in a year. (When bond prices rise, their yields fall). This decoupling -- fueled by traders bracing for a weekend strike on Iran -- proves that the classic inverse relationship has returned.
If this relationship holds, Saturday's attacks on Iran, which have threatened a broader regional conflict, could spark another Treasury rally in the coming days.
The "renewed appeal of Treasuries as a risk-off hedge could help to draw more demand," Chang added.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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(END) Dow Jones Newswires
February 28, 2026 16:56 ET (21:56 GMT)
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