Thank Record-High Stock Prices for a Flattening U.S. Yield Curve

Bond strategists have a new favorite culprit for the relentless flattening of the U.S. yield curve: the stock market.

The gap between short- and long-dated Treasury yields fell to a fresh 10-year low this week, extending the trend that has dominated the world’s largest bond market for weeks. One reason the flattening dynamic has room to run is a shift in asset allocation among money managers in favor of long-dated Treasuries, according to a growing chorus of strategists.

With the S&P 500 Index hitting another record, and year-end only weeks away, pension funds and investors committed to a balanced ...