McDonald’s Stock and 10-Year Bond Yields: Why Are They Near-Perfect Opposites?
McDonald’s (MCD) inventory has fallen about 32% since early March. The 10-year US Treasury yield has climbed nearly precisely the identical 32% over the identical stretch.
The X account Mr. Derivatives shared a chart of the sample, utilizing information via September 28. Fundstrat’s Tom Lee replied that he’s uncertain why the 2 strains transfer reverse.
McDonald’s Stock and the 10-Year Yield Move in Opposite Directions
Mr. Derivatives laid the Chicago Board Options Exchange (Cboe) 10-Year Treasury Yield Index (TNX) over McDonald’s shares from early March. The outcome seems like one line and its reflection.
The yield rose from roughly 4% to five.24% by September 28, a 19-year high. McDonald’s slid from a peak above $340 to $233.60 over the identical stretch. Both strikes come to roughly 32%, solely in reverse instructions.
The latest stretch seems even stranger. Yields rose on 19 of the final 23 buying and selling days, including 14%. Meanwhile, McDonald’s fell on 19 of these periods, shedding 14%.
Lee replied to the submit.
“Interesting. Not certain why $MCD is negatively correlated to yields. But nonetheless fascinating”
Tom Lee, co-founder and head of analysis at Fundstrat Global Advisors, on X
Three Theories That Could Explain the Mirror Image
The first principle facilities on charges. McDonald’s carries about $40 billion in long-term debt, in keeping with its first-quarter submitting, so greater yields might increase its borrowing prices. Its dividend additionally yields roughly 3%, effectively under Treasuries.
Consumer pressure affords a second principle. Bloomberg studies that cost-conscious diners are pushing again on menu costs. McDonald’s additionally expects US gross sales to dip this quarter.
The third thought factors to the Federal Reserve, which raised charges in September for the primary time since 2023, in keeping with Schwab. Since then, yields at multi-year highs could have weighed on shopper shares.
The Match Might Be Mostly Coincidence
However, none of those theories explains a match this exact. Both strains have trended a technique for about seven months, and any two trending sequence can appear like mirror photographs. Statisticians name {that a} spurious correlation.
Company information additionally issues. McDonald’s misplaced greater than 6% in three periods after its September 23 Investor Day. That drop sits contained in the 23-day window.
Therefore, the trustworthy reply is that no clear purpose exists. A yield reversal would take a look at the sample. If McDonald’s retains sliding whereas yields cool, the hyperlink seems like coincidence.
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