SPY Flags 13% Overvaluation by GF Value as Treasury Yields Surge to 2025 Highs

The Quick Take

• SPY is 13.0% overvalued by GF Value as of September 6, 2026, amid surging Treasury yields.
• Borrowing costs for the most vulnerable US companies hit levels unseen since last year's market turmoil.
• Rising 10-year Treasury yields are compressing equity risk premiums across US markets.

The SPY ETF's 13% overvaluation flag by GF Value coincides with a sharp repricing in fixed-income markets, where surging Treasury yields are compressing equity risk premiums and elevating the discount rate applied to future earnings. This dual pressure — stretched valuations colliding with higher rates — creates a structurally challenging environment for passive US equity exposure, particularly as the Federal Reserve signals an imminent rate decision at its September 16 FOMC meeting and new Chair Kevin Warsh has made price stability the committee's primary mandate.

The widening of high-yield credit spreads to multi-year highs disproportionately affects leveraged companies and private equity-backed sectors such as industrials and speculative-grade real estate. For equity markets, rising Treasury yields typically rotate capital from growth-heavy tech and consumer discretionary names toward value sectors including financials and energy, where elevated rates widen net interest margins. High-yield ETFs including HYG and JNK face outflows as the risk-adjusted return gap versus Treasuries narrows to less attractive territory for institutional allocators.

The September 16 FOMC meeting is the definitive near-term catalyst — a confirmed rate hike would validate the credit stress already priced into high-yield spreads and could accelerate equity multiple compression across growth sectors. Watch the 10-year/2-year Treasury spread for recessionary signals, and monitor earnings guidance revisions from heavily leveraged S&P 500 constituents as Q3 reporting approaches. The macro variable: whether labor market strength justifies further tightening without triggering a credit event in the overleveraged corporate sector.

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