HomeBusiness10-Year Treasury Surges, Utilities Slide Ascends in Record-Breaking Fashion

10-Year Treasury Surges, Utilities Slide Ascends in Record-Breaking Fashion

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Shares of power producers (NYSEARCA:XLU) experienced a sharp decline as U.S. Treasury yields reached multiyear highs, reducing the demand for dividend-focused utility stocks. The yield on the 10-year Treasury note closed at 4.625%, the highest level since 2007. As a result, the S&P 500 Utilities Index closed 1.9% lower after hitting its lowest intraday level since March 2021. NextEra Energy (NYSE:NEE) led the losses in the index, dropping 8.2%, following NextEra Energy Partners’ (NEP) downgraded forecast for full-year run-rate adjusted EBITDA and limited partner distribution growth rates. Other significant decliners in Wednesday’s trading included American Water Works (AWK), NiSource (NI), DTE Energy (DTE), Eversource Energy (ES), Southern Co. (SO), Alliant Energy (LNT), Consolidated Edison (ED), PPL Corp. (PPL), Wisconsin Energy (WEC), and Dominion Energy (D).

The decline in power producers’ shares was driven by the lingering high U.S. Treasury yields, which reduced the appeal of dividend-oriented utility stocks. The 10-year Treasury note reached its highest level since 2007, with a yield of 4.625%. Consequently, the S&P 500 Utilities Index experienced a 1.9% drop and touched its lowest intraday level since March 2021. Leading the losses on the index was NextEra Energy, following the downgrade in forecasts for full-year run-rate adjusted EBITDA and limited partner distribution growth rates by NextEra Energy Partners. As a result, NextEra Energy’s shares plunged 8.2%. Other major power producers, such as American Water Works, NiSource, DTE Energy, Eversource Energy, Southern Co., Alliant Energy, Consolidated Edison, PPL Corp., Wisconsin Energy, and Dominion Energy, also experienced notable declines.

In addition to the decline in utility stocks, NextEra Energy announced the sale of its Florida City Gas utility to Chesapeake Utilities for $923 million in cash. This news further contributed to the drop in NextEra Energy’s shares. Overall, the combination of high U.S. Treasury yields and negative developments in the utility sector, particularly with NextEra Energy’s lowered forecasts and the sale of its subsidiary, caused a significant decline in power producers’ shares.

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