These stocks could benefit if interest rates break out higher

Bank of America identified Prudential Financial (PRU) and JPMorgan Chase (JPM) as stocks positively correlated with rising 10-year Treasury yields, showing correlations of 48% and 35% respectively since 2014. Prudential, despite a 12% YTD decline, yields 5.2%, while JPMorgan has gained over 10% YTD and yields 2.1%; both companies have recently reported strong earnings. Other financials like Charles Schwab and MetLife also appear on BofA's list of stocks that tend to outperform as Treasury yields increase amid investor concerns about the U.S. economy and trade policy.

Analysis

Rising U.S. Treasury yields, with the 10-year approaching 4.5% (up from 4.01% in early April) and the 30-year nearing 5%, reflect investor concerns regarding U.S. economic health, government debt levels, and the dollar's stability, alongside uncertainty in U.S. trade policy. Despite these macroeconomic headwinds and waning demand for Treasury debt, investor appetite for risk assets has reportedly grown in the past two months. Bank of America's research highlights specific equities, predominantly financials (six of the top 10), that have historically outperformed the S&P 500 when 10-year Treasury note yields rise, based on performance against month-over-month changes since 2014. Prudential Financial (PRU) is identified as the top stock with a 48% correlation; although its stock has declined over 12% in 2025, PRU offers a 5.2% dividend yield and surpassed Wall Street's first-quarter earnings estimates, with most analysts assigning a hold rating and a consensus price target implying 9% upside. JPMorgan Chase (JPM) also demonstrates a significant 35% correlation to 10-year yield changes, its shares having appreciated more than 10% in 2025, outperforming the S&P 500's sub-1% rise, and providing a 2.1% yield. JPM recently reported strong first-quarter results that exceeded analyst estimates, bolstered by robust trading profits, even as CEO Jamie Dimon has expressed caution about a potential recession; approximately 59% of analysts rate JPM a buy, envisaging a little over 3% upside from current levels. Other financial institutions like Charles Schwab and MetLife are also noted for their positive performance correlation with increasing Treasury yields.

Key Decisions for Investors

• Investors anticipating a continued ascent in Treasury yields should consider increasing allocations to financial sector equities, particularly those demonstrating a strong positive correlation to yield movements.
• Prudential Financial (PRU) may present a tactical opportunity for yield-focused investors, given its high correlation with Treasury yields, significant dividend yield, and recent earnings outperformance, despite its year-to-date stock price decline.
• JPMorgan Chase (JPM) remains a noteworthy consideration for its established outperformance and solid fundamentals in the current environment, although its consensus price target suggests more modest near-term capital appreciation.
• Closely monitor U.S. economic data, fiscal policy developments, and trade policy shifts, as these factors will be key drivers of Treasury yield trends and the performance of interest-rate sensitive investments.