Stocks vs bonds: the divergence

On 2025-10-07, the S&P 500 closed at 6,714.59 while the 10Y Treasury yield fell to 4.14% and the 2Y to 3.57% fred.stlouisfed.org fred.stlouisfed.org fred.stlouisfed.org. With HY OAS at 2.82, VIX at 17.24, and 10Y breakevens at 2.35% on 2025-10-07, the split reads as equities leaning into a soft landing while rates market pricing implies expectations of slower growth and additional Fed easing, without a credit break fred.stlouisfed.org fred.stlouisfed.org fred.stlouisfed.org.

The S&P 500 closed at 6,714.59 on 2025-10-07, up 14.4% YTD from 5,868.55 and 34.8% above its Apr. 8 low of 4,982.77, even as the 10Y Treasury yield fell to 4.14% and the 2Y to 3.57% on the same date fred.stlouisfed.org fred.stlouisfed.org fred.stlouisfed.org. That is the split: equities are paying for a soft landing and earnings durability, while rates market pricing implies expectations of slower growth and additional Fed easing, with the curve at +57 bp on 2025-10-07 rather than an inversion warning fred.stlouisfed.org. The bond bid only starts to look like an equity problem if credit or inflation confirms it, and neither is there: HY OAS was 2.82 on 2025-10-07, still near tights and well inside its Apr. 2025 spike to 4.61, VIX was 17.24 versus its Apr. 2025 peak of 52.33, and 10Y breakevens were 2.35%, leaving the implied 10Y real yield at 1.79% on 2025-10-07 even after the Sep. 18 cut to a 4.25% upper bound fred.stlouisfed.org fred.stlouisfed.org fred.stlouisfed.org fred.stlouisfed.org fred.stlouisfed.org. The read could shift if HY OAS moved back toward 4.61 or breakevens pushed above 2.35% fred.stlouisfed.org fred.stlouisfed.org.