Why Oil Prices and Treasury Yields Have Started To Disconnect

The historically close positive correlation between oil prices and 10-year Treasury yields has broken following the first interest rate cut from the Fed in the middle of September. Over the years, when oil prices have risen, the longer-date Treasury yields,  such as the 10-year bond used as a benchmark of economic and inflationary prospects, have also increased. That’s because higher crude oil prices push inflation higher, and high inflation boosts Treasury yields because the fixed payment of the bonds is eroded by said inflation. Yet,…