Bond-Oil Correlation Has Flipped: What It Means for Hedging

The relationship between 10-year Treasury yields and crude oil prices has shifted from statistically negligible in 2012 to distinctly positive today. This regime change reflects demand-driven inflation: when aggregate demand rises, both oil prices and rate expectations climb together. The shift upends traditional portfolio hedges that relied on oil as a counterweight to rate risk. Investors now face tighter co-movement between energy and fixed income—complicating the 60/40 framework and forcing recalibration of cross-asset strategies.