What 1987 Teaches About Two Markets Pricing the Same Risk So Differently

By EC Assets · Published 8 October 2026 · Updated 9 October 2026

In 1987, the bond market and the stock market spent most of the year disagreeing.

Between January and October, the 30-year Treasury yield climbed from 7.29% to above 10%. Over the same months, US equities ran to a record in August. Higher discount rates should have weighed on valuations. For a long stretch, they did not.

How that year ended is well known. The more useful lesson is what came before it.

Two markets can look at the same economy and put very different prices on uncertainty. And they can hold those positions for months.

That is the backdrop today. On 5 October, the 30-year Treasury closed at 5.66%, its highest daily close in more than 24 years, while the S&P 500 finished near a record (Saxo). The cost of insuring Treasury positions recently reached the top of Saxo's recorded range. Equity volatility sat at average.

Each market has its own logic. Bond investors are pricing inflation, supply and a Fed that may not be finished. Equity investors are pricing earnings growth and the AI cycle. Both views can be internally consistent and still disagree about the same risk.

This is what 1987 actually teaches. Implied volatility is a price, not a verdict. When one market pays up for uncertainty and another prices it as ordinary, the gap itself is information.

At EC Assets, we treat divergences like this as a reason for discipline, not prediction.

Markets can disagree for a long time. Risk management starts by noticing that they do.