Stock Bond Correlation Breakdown dormant

Stock Bond Correlation Breakdown is a macro theme formerly tracked by Themic. The Iran supply shock has driven the stock-bond correlation to a late-1990s extreme (Marshall, GS): inflationary + growth-negative simultaneously, breaking the bond hedge. The theme went dormant after 2026-06-25 and is no longer actively updated; its dated ledger is preserved below as an archive.

Exposed instruments: ZN, ES, SR3, GC

Thesis (as of 2026-06-25)

The Iran supply shock has driven the stock-bond correlation to a late-1990s extreme (Marshall, GS): inflationary + growth-negative simultaneously, breaking the bond hedge. Channel: ZN's portfolio-hedge function vs ES is impaired; DM govt bonds are the most-crowded institutional short. Resolution is tied to an Iran de-escalation.

Development timeline

• 2026-06-25 Jun 25: ING (via Bond Beat) reaffirms the repair — VIX ~20, record positive bond-equity correlation 'expected to normalise', with the recent yield push driven by REAL rates not inflation expectations, so if growth concerns dominate real rates revert and the negative hedge restores. 10Y at 4.404%; bull-steepening printed (2y -2.7bp > 10y -1.2bp > 30y -0.3bp). SocGen turned neutral on flatteners, initiating tactical 2s10s/5s30s steepeners.
  Sources: independent channels
• 2026-06-24 REVIVE Jun 24: ING Rates Spark ('Bonds back to hedging market risks', via Bond Beat) argues the Iran-driven POSITIVE stock-bond correlation is REPAIRING — lower oil restores the negative correlation, and the recent yield rise was real-rate (growth-concern) driven not inflation-expectation driven, so bonds again offset equity losses. First concrete evidence the broken hedge is mending, contra the late-1990s-extreme read. Prints: 2y breakevens -5.1bp, 10y breakevens -3.1bp; bull steepener (2y -2.7bp > 10y -1.2bp > 30y -0.3bp).
  Sources: independent channels
• 2026-06-10 Intraday: live confirmation of the impaired hedge — equities offered (ES -0.91%, NDX futs -1.41%) yet 10Y yield RISING to 4.53% (+0.24 as reported, WSJ), i.e. ZN offered alongside ES. WSJ/Bloomberg explicitly tag this 'stagflation signal, not safe-haven.' The simultaneous risk-off-in-stocks / yields-up print is the cleanest broken-correlation evidence in the window; CPI (pre-open) is the immediate override.
  Sources: WSJ, Business Insider
• 2026-06-10 Intraday: BMO supplies a COUNTER-print to the broken-hedge read — during Tuesday's Iran-driven equity sell-off Treasuries DID retain safe-haven status (stocks down, bonds bid), UNLIKE the post-payrolls session where stocks AND bonds sold together. So the correlation breaks on the DATA/inflation shock but the bond hedge survives the pure GEOPOLITICAL shock. macro commentators concurs: 'if things heat up in Iran, expect a downdraft in equities AND bonds while the dollar moves higher' — i.e. conditional on which shock dominates. Refines, not reverses, the GS late-90s read.
  Sources: BMO, independent channels
• 2026-06-09 Intraday: with oil de-escalating and risk rebounding (US futures +0.5%, Asia sharply higher) yet 2y at 4.16% / 30y 5.03% / 10y real 2.20% on the hike repricing, the correlation-breakdown driver has shifted from the Iran supply shock to FED-HIKE pricing — correlation-repair now gated primarily on CPI cooling the hike path rather than an Iran ceasefire. 10y unchanged at 4.56% even as front-end repriced (bear-flatten persists).
  Sources: independent channels
• 2026-06-08 Jun 8: GS Marshall reiterated stock-bond correlation at highest since late-1990s; with Iran re-escalating overnight, the positive correlation is confirmed live — ZN +2.6bp (4.562%) is NOT hedging the equity gap-down (ES -2.64%, NQ -4.77%). Digest explicit: bonds only hedge equities again when Iran resolves. Correlation-repair remains gated on Iran de-escalation (~late Jun/early Jul).
  Sources: Goldman Sachs
• 2026-06-07 GS (Jun 5, 839-client survey) reaffirms stock-bond correlation at highest since late 1990s, driven by Iran supply-shock dynamics (compresses growth + raises inflation simultaneously) — bonds not hedging equities; DM govt bonds the top institutional short (22%). Partially evidenced Jun 5: NFP drove ZN bear-flattening (10Y +5.7bp to 4.53%) WHILE ES fell -2.6% — bonds failed to hedge the equity drawdown. GS Marshall: correlation normalises if Iran resolves, restoring the bond hedge. MOVE elevated into auction/CPI risk.
  Sources: Goldman Sachs
• 2026-06-05 NEW theme. GS rates strategy (William Marshall): stock-bond correlation at its highest since the late 1990s, driven by the Iran supply shock that is simultaneously inflationary (bearish bonds) and growth-negative (bearish equities) — the traditional diversification hedge is broken, repair requires an Iran resolution. DM govt bonds are the #1 institutional short (22%, GS Marquee). ZN no longer a reliable ES hedge in this regime.
  Sources: Goldman Sachs