Surface flow lava oozes out of the nooks and crannies dried lava during an eruption from Kilauea volcano.

Hidden Market Stress Builds as Rates and Oil Climb

March 11, 2026

The S&P 500 finished the day flat, and there is not much to really say here, because literally nothing changed during the session, at least not from an equity market standpoint. Interest rates, on the other hand, rose sharply following the CPI report, with the 10-year climbing 7 bps to 4.23% and the 2-year rising 6 bps. The 2-year seems more interesting of the two at this point, only because of where it is and its relationship with oil over the past years.

The 2-year climbed above resistance at 3.65% and closed just above the 200-day moving average. A move back to 3.8% on the 2-year at least, based on the technical chart, seems like a real possibility.

The connection between rates, oil, and even the dollar has been very strong in recent years, so if oil is going to be trading up to these higher levels, the more likely it is that rates will rise and the dollar will strengthen.

Meanwhile, oil continues to trend higher overall, with the 10-day exponential moving average acting as support and the upper Bollinger band as resistance. So for now, as long as oil stays above the 10-day, the higher trend will remain intact.

This is having many effects in the market that are not visible in the S&P 500. First off, HY credit spreads continue to widen, and second, cross-currency basis swaps have turned more negative, which tells a few things. Demand for dollar hedging is growing, liquidity flows have diminished, and financial conditions are tightening.

If this continues, the road to the equity market will not be fun.

-Mike

Glossary by ChatGPT

Bollinger Band — A technical analysis indicator that plots volatility bands above and below a moving average to help identify potential overbought or oversold conditions.

Cross-Currency Basis Swap — A financial derivative used to exchange interest payments and principal in different currencies, often reflecting funding pressures and demand for currency hedging.

Exponential Moving Average (EMA) — A type of moving average that places greater weight on recent prices to better capture short-term trends.

Financial Conditions — A broad measure of market liquidity and borrowing costs that reflects how easy or difficult it is for businesses and consumers to access capital.

High-Yield Credit Spread — The difference in yield between lower-rated corporate bonds and comparable government bonds, often used as a measure of credit risk and financial stress.

Resistance Level — A price level on a chart where an asset historically struggles to move above due to selling pressure.

Support Level — A price level where an asset tends to find buying interest, preventing it from falling further.

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