Oil prices and bond yields no longer moving together

Data: Axios analysis of FactSet data; Note: Correlation over preceding 30 trading sessions between daily change in West Texas Intermediate crude and change in 10-year U.S. Treasury yield; Chart: Neil Irwin/Axios For much of this year, on any given day, you could look at the price of oil and correctly guess what happened to bond yields. In the last few weeks, that correlation has evaporated. Why it matters: It's a sign that growth risks may be supplanting inflation worries as the dominant economic concern. State of play: It's not obvious whether an energy supply shock should affect inflation or growth more. On the one hand, more expensive fuel can ripple through prices for everything else. On the other, more expensive energy acts like a tax on consumers and businesses that consume it. Since the attack on Iran in late February , markets have treated the former concern as the central dynamic in the global economy. Zoom in: As such, on days when oil futures pointed to higher prices, bonds almost always sold off and their yields — which move in the opposite direction from their prices — rose. Traders were pricing in a world where inflation is higher for longer, and central banks react by raising rates more — and betting, implicitly, that growth would prove resilient despite the energy price headwind. For the 30 trading days ended Sept. 10, the correlation between the one-day move in West Texas Intermediate crude and 10-year U.S. Treasury yield reached a stunning 77%. The Financial Times noted in late September that the correlation was the highest it had been since the Persian Gulf War of the early 1990s. Yes, but: Now, that correlation has collapsed — and is about negative 10% over the last 30 trading days. In other words, on days when oil rises, it's more likely than not that bond yields fall. Between the lines: It's probably not a coincidence that this shift has occurred at the same time cracks have appeared in the debt market that's financing the AI buildout. As long