The S&P 500 index gained 2.6 percent in February even though the markets became increasingly volatile over the last week of the month as interest rates on the 10-year U.S. Treasury Note rose to the highest level in more than a year. As vaccine rollouts have increased, the equity markets have seen a rotation out of a number of COVID-lockdown “winners” into those areas hardest hit such as energy, travel, and leisure companies that stand to benefit from the re-opening of the economy.
The 10-year Treasury yield rose to 1.44 percent at the end of February from 0.93 percent at year-end and a low of 0.52 percent in August 2020 as seen in the following chart. While interest rates are still quite low on a relative basis, the rate of change has been significant as the yield has nearly tripled in about 6 months. To put that move into context, the price decline on the 10-year Treasury is equivalent to roughly seven years’ worth of interest income.