Equity Risk Premium Inversion dormant
Equity Risk Premium Inversion is a macro theme formerly tracked by Themic. Macro Mornings flags the US 10y yield (~4.5%) now exceeds the S&P 500 trailing earnings yield (spread +0.39, cycle peak +0.53) The theme went dormant after 2026-06-18 and is no longer actively updated; its dated ledger is preserved below as an archive.
Thesis (as of 2026-06-18)
Macro Mornings flags the US 10y yield (~4.5%) now exceeds the S&P 500 trailing earnings yield (spread +0.39, cycle peak +0.53) — the first bond-over-equity reading since 2003, declaring 'TINA dead.' Mechanism: with bonds out-yielding the largest equity index, capital structurally drifts from equities to fixed income as the decade-long valuation prop erodes; the named historical parallel is the rolling-into-March-2000 inversion (S&P -50%, Nasdaq -78%, 15yr to recover). A sustained-inflation pipeline (SuperCore PPI 5.1% on 11-month run) keeps the yield leg elevated. Bears on ES (structural de-rating risk if sustained), ZN (fundamental — not just tactical — duration bull), SR3 (dovish Warsh amplifies the bond bid).
Development timeline
- Jun 18: the Warsh-driven 2y +17bp / TIPS 10y real-yield-highest-since-May-2025 spike lifts the bond leg of the inversion while S&P -1.21% de-rates equities — both moving in the direction that widens the bond-over-equity gap. Reinforces the 'TINA dead' / capital-drifts-to-fixed-income mechanism, now with a hawkish-Fed catalyst rather than just sticky-inflation pipeline.Sources: Bloomberg, independent channels
- Jun 16: inversion reaffirmed at +0.39 (10y ~4.5% vs S&P earnings yield), most extreme since 2003, 30y briefly 5.03%; SuperCore PPI 5.1% '11 candles' keeps the yield leg elevated. NEW supply-leg corroboration from macro commentators (Capital Wars): ~$25T gross UST auction in 2026 (~$500bn/wk), debt/liquidity ratio toward crisis-consistent levels — 'after the everything bubble may come the everything bust', adding a Treasury-supply mechanism beneath the bond-over-equity prop erosion. Monday's deal rally pushed Nasdaq to ATH (Micron +10.75%) yet ERP gap persists.Sources: Market Ear, independent channels
- Jun 16 (run3): Bond Beat decouples the oil-relief→bond-rally chain that bulls assumed — 10yr breakevens have fully reset to pre-war (2.3%, 'perfect score') yet 10yr REAL yields remain >2%, structurally ~40bp ABOVE pre-war and unlikely to collapse, so the 10y stays elevated (4.40-4.50% range). This keeps the high-yield-leg of the ERP inversion structurally intact even as the inflation premium unwinds; lagged energy→core pass-through holds inflation sticky through summer. ING: 'tough to get overly bullish on bonds'. Counter to macro commentators' ZN-bull/QT-only path logged this morning.Sources: independent channels
- Jun 14: ERP inversion reaffirmed and dated — spread +0.39 (cycle peak +0.53), 30y just printed a 5.03% handle reinforcing the yield leg; the paywalled signal now titled 'A Record in 80 Years of Data' framed as the binary: 'either earnings outrun everything forever, or bonds slowly win the argument.' SuperCore PPI 11-month run to 5.1% keeps the elevated-yield leg intact. No price reversal of the inversion this window.Sources: independent channels
- NEW theme (Macro Mornings, Jun 13, sole source, quant core paywalled): US 10y now out-yields S&P earnings — first bond-over-equity signal since 2003 (spread +0.39 vs cycle peak +0.53). 'TINA is dead.' Full dot-com parallel laid out. Summer 'nine-chart walk' series flagged; an '80-year record' positioning/crowding signal teased. Distinct from market-structure-fomo (which is buyer-base/flow) — this is the valuation cross itself.Sources: independent channels