# VC10X Pulse - Bond Yields πŸ“ˆ vs StocksπŸ“ˆ : Who Bends First? An episode of [VC10X - Investing, Venture Capital, Asset Management, Family Office, Wealth Management](https://invisiblenetwork.ai/podcast/1632806986), 14 May 2026, 7:40. Audio: https://anchor.fm/s/a453ddd4/podcast/play/119981738/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2026-4-14%2F424141659-44100-2-15f41e46f9f46.mp3 Stock markets are pushing higher, but bond yields are telling a very different story. In this episode of VC10X, we break down the growing tension between rising bond yields and resilient equity markets β€” and why investors are now asking one key question: who bends first? The bond market is pricing sticky inflation, higher-for-longer interest rates, fiscal deficits, and geopolitical risk. Meanwhile, the stock market is still being powered by AI optimism, strong mega-cap earnings, and confidence that growth can outrun higher discount rates. But both sides cannot be right forever. We discuss: - Why rising Treasury yields matter for stock valuations - What the bond market is really warning about - Why equities, especially tech and AI stocks, are still holding up - The 3 possible outcomes: bonds bend, stocks bend, or both bend - Which sectors could benefit if yields stay high - How investors should think about risk, valuation, and portfolio positioning The key question: Are stocks right to ignore rising yields β€” or is the bond market warning us before equities catch down? This episode is for investors trying to understand the biggest macro tension shaping markets right now. Subscribe to VC10X for sharp conversations on venture capital, public markets, technology, and investing. LINKS Prashant Choubey - https://www.linkedin.com/in/choubeysahab Subscribe to VC10X newsletter - https://vc10x.beehiiv.com Subscribe on YouTube - https://youtube.com/@VC10X Subscribe on Apple Podcasts - https://podcasts.apple.com/us/podcast/vc10x-investing-venture-capital-asset-management-private/id1632806986 Subscribe on Spotify - https://open.spotify.com/show/7F7KEhXNhTx1bKTBFgzv3k?si=WgQ4ozMiQJ-6nowj6wBgqQ VC10X website - https://vc10x.com For sponsorship queries reach out to prashantchoubey3@gmail.com This channel is for asset managers, allocators, and investors who want analysis that holds up β€” not headlines dressed as insight. Subscribe for weekly data-driven breakdowns of the forces reshaping capital markets. Disclaimer:This content is for informational purposes only and does not constitute investment advice. ## Transcript [0:00] Markets are sending 2 completely different messages. [0:03] The stock market is trying to make new highs, tech investors [0:06] are still paying off for AI growth. [0:09] Credit markets are still surprisingly calm. [0:12] But the bond market is not celebrating. [0:14] Yields are rising, long bonds are under pressure, inflation [0:19] fears are back, and rate cut expectations are getting pushed [0:23] further out. So the questions for investors [0:25] is simple. Who is wrong? [0:28] Either bond markets eventually calm down and validate the [0:31] equity rally, or stocks eventually accept that a higher [0:34] cost of money deserves your valuations. [0:37] Let's try to unpack this. The US 10 year Treasury yield is [0:42] hovering near the psychologically important 4.5% [0:46] area after weak demand at a 10 year auction, while the 30 year [0:52] yield has been testing the 5% zone. [0:55] That matters because these are not just numbers on a bond [0:59] screen. These are the discount rates for [1:01] every asset class. At the same time, stocks have [1:05] been trying to look through the risk. [1:07] Reuters noted that European stocks were rising and Wall [1:10] Street was set to open higher even as common bond yields [1:15] stayed elevated. But Wall Street had just pulled [1:19] back from recent record highs after stronger inflation data [1:22] hit sentiment. That is the divergent here. [1:26] Equities are trading like growth wins. [1:29] Bonds are trading like inflation and supply risk win. [1:32] Let's try to understand why the bond yields are rising. [1:35] There are three forces pushing yields higher. [1:38] First, inflation is not dead. April CPI came in hotter than [1:43] expected and the move was tied heavily to energy costs. [1:47] That makes the Fed's job harder because oil driven inflation is [1:52] politically painful and hard to ignore. [1:55] Second rate cuts are getting delayed. [1:57] UBS pushed its expected Fed cuts to December 2026 and March 2027, [2:03] citing persistent inflation in the resilient labor market. [2:06] Other brokerages have also scaled back or removed 2026 [2:11] trade cut expectations. Thirdly, bond supply in fiscal [2:14] risk matter. Investors are demanding more [2:17] yield to absorb long duration government debt. [2:20] Reuters has reported that G7 long bond stress has [2:23] intensified, with long maturity yields across major economies [2:28] reaching levels not seen in more than two decades. [2:31] So the bond market is not saying the Fed may stay higher for [2:35] longer. It is also saying governments [2:37] need to borrow a lot. Inflation risk is not gone and [2:41] investors want to be paid more to lend long term. [2:45] Now let's try to understand why stocks are not breaking yet. [2:49] The equity market has its own logic. [2:51] First, AI earnings and CapEx are still powerful enough to [2:55] dominate the index. The biggest companies in the SMB [2:58] 500 are not normal cyclicals. They are huge cash flows, [3:01] pricing power, and direct exposure to AI infrastructure or [3:05] AI software. Secondly, higher yields hurt all [3:09] equities, but not equally. If a company has strong margins, [3:12] low debt, and durable earnings growth, investors may tolerate a [3:16] higher discount rate. That is why mega cab tech can [3:20] hold up better than smaller levered or speculated companies. [3:24] Thirdly, markets may believe yields are near a pain [3:27] threshold. Every time long yields approach [3:30] uncomfortable levels, investors start assuming either growth [3:33] will slow, the Fed will eventually pivot, or buyers will [3:38] step in for bonds. In other words, stocks may be [3:41] betting that bond sell off cannot go too far without [3:44] creating its own reversal. Now The Who bends first [3:48] question. There are really 3 outcomes. [3:51] The first one is bonds bend first bullish for stocks. [3:55] This happens if oil cools, inflation softens, labor data [3:58] weakens, our investors rush back into treasuries at attractive [4:03] wheels, great cut hopes return and equity valuations get [4:07] relief. In this scenario, the stock [4:09] market was right to look through the scare. [4:11] The winners here will be growth stocks, air beneficiaries, long [4:15] duration text software, small caps. [4:18] The losers will be cash like defensive that were only [4:21] attractive because yields are high. [4:24] Now let's understand the other scenario that is stocks bent [4:27] first, the bearish scenario. This happens if yields keep [4:32] rising and stay high. At some point a 10 year yield [4:35] near or above 4.5 to 5% competes directly with equities. [4:40] Investors start asking why be 25 to 30X earnings for risky growth [4:44] when treasuries offer a high nominal return that forces [4:49] valuation compression. The most vulnerable stocks are [4:52] the ones price for perfection, expensive AI names, unprofitable [4:56] growth, levered companies and companies dependent on cheap [5:00] refinancing. The winners in this case will be [5:04] cash rich companies, value stocks, banks, in some cases [5:08] energy, defence, select commodities. [5:11] The losers will be high multiple tech, long duration growth, weak [5:15] balance sheets. Now the third scenario both bend [5:19] and it's the stagflation scenario. [5:21] This is the ugly case. Yields remain high because [5:25] inflation is sticky, but stocks fall because growth slows. [5:29] That is when market stops celebrating higher for longer as [5:32] a sign of economic resilience and start treating it as a [5:35] squeeze on consumers, companies and governments. [5:38] This is the scenario where diversification matters. [5:41] Goals, short duration bonds, quality equities, energy [5:45] exposure and cash become more valuable. [5:48] The bond market is pricing for the cost of money. [5:52] The stock market is pricing the promise of growth. [5:55] The next big move depends on which force proves stronger. [5:59] Right now equities are saying AI and earnings can carry us. [6:04] Bonds are saying not if inflation, deficits and oil keep [6:08] pushing the discount rate higher. [6:11] For investors, this is not a time to blindly chase the index. [6:14] It is a time to separate three different kinds of companies. [6:19] One, companies that can grow even with high rates. [6:22] These are quality compounders with pricing power, strong free [6:26] cash flow and low refinancing risk. [6:29] Two companies that only work if rates fall. [6:32] These are the dangerous ones. The evaluations depend more on [6:35] multiple expansion than earnings growth. [6:38] Three companies that benefit from the reason yields are [6:42] rising. If yields are rising because of [6:44] inflation, energy stress, fiscal risk or defence spending, then [6:48] some commodity, energy, defence and financial names may actually [6:52] be beneficiaries. If the market is not confused, [6:56] it is divided. The bond investors are demanding [7:00] compensation for inflation and fiscal risk. [7:03] Equity investors are paying for AI growth and earnings [7:06] resilience. Both stories can be true for a [7:09] while, but not forever. If yields fall, stocks will look [7:13] smart. If yields keep rising, stocks [7:16] will have to reprice. And if inflation stays high [7:19] while growth slows, both markets may be forced to adjust at the [7:23] same time. This is the real tension. [7:26] Not whether the yields matter or not, but when equities finally [7:30] decide they matter again. That's all for this week. [7:34] We'll be back next week with another story from the front [7:36] lines of global investing VC10X. 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