Treasury Yields Surge As Stocks Fall And Dollar Rises

By Michael J. Kramer of Mott Capital Management

Founder/CEO at Mott Capital Management, LLC • Sep 23, 2026 at 5:17 PM EDT • Updated Sep 23, 2026 at 5:39 PM EDT

Treasury yields surged on robust PMI data, pushing the 2-year yield toward 5% and pressuring the S&P 500.

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The S&P 500 fell by 75 bps as the 2-year Treasury yield rose 14 bps to 4.89% following a strong S&P Global PMI report. Treasury yields moved higher across the curve, with the 10-year yield rising about 10 bps to close at 5.1%.

The move in yields was significant but, in some ways, not entirely unexpected. What was surprising was seeing such a large repricing in a single day following economic data that does not ordinarily generate this kind of market reaction. At this point, a move in the 2-year Treasury yield to 5% would not seem particularly far-fetched, but then again, I have been talking about that possibility for several weeks now.

HYG broke below key support at $78.40 today, raising the risk that credit spreads are beginning to widen more meaningfully. This is based on HYG adjusted for its dividend yield.

The breakdown is worth watching because a further decline toward $77.65 could signal additional widening in credit spreads and growing stress in the credit market.

The dollar index also rose sharply today, breaking above resistance at 100.50 and potentially setting up a move toward the 101.80 to 102 region. The stronger dollar makes sense amid rising rates, stronger economic data, and markets increasingly pricing in the possibility of additional Fed rate hikes.

If the dollar continues to strengthen, it could become another important source of tightening in financial conditions, particularly alongside higher Treasury yields and widening credit spreads.

But whether a stronger dollar ultimately translates into tighter financial conditions will depend in part on what happens in cross-currency basis swaps. So far, we have not seen signs that the dollar’s recent strength is transmitting through the cross-currency basis, but that will be important to watch if financial conditions continue to tighten.

We care specifically about this transmission channel because of its implications for global dollar liquidity and, ultimately, the liquidity available to risk assets.

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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

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