Higher 10 year yield futures tend to drive capital flows into short-duration fixed income, reducing liquidity in high-P/E equity markets. Traders are watching for breakout patterns in treasury futures as a proxy for equity sector rotation timing. But perhaps the best thing about PennantPark Floating Rate Capital's operating model is that 99% of its loans sport variable rates. When the Federal Reserve aggressively raised interest rates to tackle a rapid increase in the prevailing rate of inflation from March 2022 to July 2023, PennantPark's weighted-average yield on debt investments soared by more than 500 basis points. Even though the nation's central bank is now cutting rates, it's doing so slowly and telegraphing its moves, which has allowed PennantPark to maintain a superior yield on its loan portfolio. "We recently cut our Attractive rating on US equities to Neutral, following the strong recent rally. However, our current Neutral rating on U.S. equities should not be mistaken for a bearish view, and we continue to recommend a full strategic allocation," the bank said. "The recent earnings season has demonstrated the strength in structural AI earnings trends, we expect U.S. stocks to move higher over the next 12 months, and we maintain our sector-level Attractive ratings on communications services, information technology, health care, and utilities." Technical charts show an overbought signal in 10 year yield futures RSI, suggesting potential pullback. A dip in yields could reignite bullish flows into equities, especially in high-growth tech and biotech plays.