If there was one safe bet over the course of 2026, it was that treasury yields would rise alongside a move up in oil futures contracts. Over the past month, that ended, and according to Jeffrey Rosenberg, senior portfolio manager of the Systematic Alternatives ETF (IALT) at BlackRock, the world's largest asset manager, the breakdown in that trade has big implications for the market.
"Oil and treasury yields had this amazing correlation and in October it just stopped," Rosenberg said on the most recent CNBC "ETF Edge."
The relationship between oil and bond yields was featured in Federal Reserve Chair Kevin Warsh's FOMC press conference on Wednesday, with Warsh noting how oil futures have continued to rise, a factor the central bank must consider in its fight against inflation. But Rosenberg said what Warsh didn't talk about was "the most important takeaway."
"Treasuries and oil had an 80% correlation this year," Rosenberg said, which is "outsize" relative to normal correlations. "We've basically been trading off oil for good reason." "
What happened? Rosenberg says you can sum it up by looking to the deflated AI trade. As the market moved away from that oil-treasuries trading correlation in October, "It told us something important," he said. "In the market's mind, the geopolitical risk is secondary to AI risk," he said.