Industrials (XLI) vs 10Y Treasury Yield
XLI (Industrial Select Sector SPDR Fund) tracks the industrial sector of S&P 500. April 2026 top weights: GE Aerospace ~5 percent, Caterpillar ~5 percent, RTX ~4 percent, Boeing ~4 percent, Honeywell ~4 percent, Union Pacific ~3 percent.
Also known as: Industrials (XLI) (ETF_XLI, industrials) · 10Y Treasury Yield (10Y yield, 10 year treasury, TNX)
Why This Comparison Matters
XLI (Industrial Select Sector SPDR Fund) tracks the industrial sector of S&P 500. April 2026 top weights: GE Aerospace ~5 percent, Caterpillar ~5 percent, RTX ~4 percent, Boeing ~4 percent, Honeywell ~4 percent, Union Pacific ~3 percent. The 10-year Treasury yield (FRED DGS10) sits at 4.31 percent. Industrials are cyclical sector that benefits from economic expansion. Rising 10Y yields often coincide with growth/expansion regimes that benefit XLI. Pre-2024 XLI had +0.30 to +0.55 correlation with 10Y (positively correlated). The 2024-2026 era saw XLI benefit from defense capex (Russia-Ukraine, Iran war, NATO 2.5-3 percent GDP target), aerospace recovery (Boeing 737 MAX recovery), and reshoring/infrastructure capex.
The April 2026 Configuration
XLI price approximately $130 (April 2026). 10Y yield 4.31 percent. Top weights: GE Aerospace ~5%, Caterpillar (CAT) ~5%, RTX ~4%, Boeing (BA) ~4%, Honeywell (HON) ~4%, Union Pacific (UNP) ~3%. Combined top 6 ~25%.
XLI composition: aerospace/defense (GE, BA, RTX, LMT, NOC, GD) ~22%; capital goods/machinery (CAT, DE, ROK, ITW, EMR, ETN, PH) ~25%; transports (UNP, CSX, DAL, UPS, FDX, NSC) ~15%; building products (CARR, OTIS, JCI) ~5%; conglomerates (HON, MMM) ~10%; environmental services (RSG, WM) ~5%; other (electrical, professional services) ~18%.
XLI rallied substantially in 2024-2026 era. 2024 +20%, 2025 strong, 2026 modest gains. Defense capex tailwind (NATO 2.5-3% GDP target, Iran war defense spending). GE Aerospace +50% past 12 months on engine demand recovery. Caterpillar benefited from infrastructure capex (CHIPS Act, IRA, data center construction). Boeing recovering from 737 MAX issues.
Forward-looking: continued elevated 10Y supports XLI through positive correlation. Defense spending continues. AI data center construction supports CAT (excavation), HON (controls), JCI (HVAC).
Why Industrials Are Positively Correlated to 10Y
XLI rate sensitivity differs from defensive sectors. Drivers.
Growth regime: rising 10Y often signals economic expansion. Industrials benefit from expansion (capex demand, transport volume, defense spending). Positive correlation.
Non-duration cash flows: industrials have current/near-term cash flows. Less duration drag than tech/REITs. Modest rate sensitivity.
Capex sensitivity: rising rates can compress capex investment plans. However, sector-specific capex narratives (data center construction, defense spending, electrification) have offset rate concerns.
Reshoring/infrastructure: CHIPS Act, IRA fiscal spending supports industrial capex. Supports XLI even with elevated rates.
Empirical: 100bp 10Y rise typically associated with 0-3 percent XLI move (modest, can be positive or negative depending on context). Compare to XLU/XLRE -8-12% on same shock.
The practical implication: XLI-vs-10Y captures growth/expansion regime indicator. Both rising = expansion regime confirmed.
How XLI and 10Y Diverge
Conditional Forward Response (Tail Events)
How 10Y Treasury Yield has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in Industrials (XLI). Computed from 1,238 aligned daily observations ending .
Following these triggers, 10Y Treasury Yield rises 0.94% on average over the next 5 sessions, versus an unconditional baseline of +0.60%. 124 qualifying events; 10Y Treasury Yield closed positive in 57% of them.
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Frequently Asked Questions
What are XLI and the 10Y Treasury yield?+
XLI (Industrial Select Sector SPDR Fund) tracks industrial sector of S&P 500. April 2026 top weights: GE Aerospace ~5%, Caterpillar ~5%, RTX ~4%, Boeing ~4%, Honeywell ~4%, Union Pacific ~3% (top 6 ~25%). XLI price ~$130. 10Y Treasury yield 4.31%. Composition: aerospace/defense (GE, BA, RTX, LMT, NOC, GD) ~22%, capital goods/machinery (CAT, DE, ROK, ITW, EMR, ETN, PH) ~25%, transports (UNP, CSX, DAL, UPS, FDX, NSC) ~15%, building products (CARR, OTIS, JCI) ~5%, conglomerates (HON, MMM) ~10%, environmental services (RSG, WM) ~5%, other ~18%. 2024 +20%; defense capex tailwind; GE Aerospace +50% past 12 months; CAT benefits from infrastructure + data center construction.
Why are industrials positively correlated to 10Y?+
Growth regime: rising 10Y signals economic expansion. Industrials benefit from expansion (capex demand, transport volume, defense spending). Positive correlation. Non-duration cash flows: current/near-term cash flows. Less duration drag than tech/REITs. Capex sensitivity: rising rates can compress capex but sector-specific narratives (data center, defense, electrification) offset. Reshoring/infrastructure: CHIPS Act, IRA fiscal spending supports industrial capex. Empirical: 100bp 10Y rise = 0-3% XLI move (modest, can be positive). Compare XLU/XLRE -8-12%. April 2026 setup: 10Y 4.31% + XLI near recent highs. Expansion regime confirmed.
How do XLI and 10Y diverge?+
10Y rising + XLI rallying: growth/expansion regime (current 2024-2026). Long XLI benefits. 10Y rising + XLI falling: stagflation or late-cycle capex fears. 1970s pattern. Defensive positioning. 10Y falling + XLI rallying: Fed-easing recovery + capex resumption. 10Y falling + XLI falling: confirmed recession. Long-run correlation 0.30-0.55 (positive). Strengthens during expansion regimes. April 2026: 10Y 4.31% + XLI near recent highs. Confirmed expansion. Long XLI through ETF or individual names.
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