The 10-year Treasury yield has climbed to its highest level in 20 months as a global bond selloff pushes borrowing costs higher for households, businesses and governments. Strategists say the market isn't in crisis yet, but a break above 5% could shift stocks into a broader risk-off mode.
Yield climbs to a 20-month high
A global bond market rout has pushed yields to their highest levels since 2008. The 10-year Treasury yield rose to 4.799% on Tuesday, gaining four basis points and marking its highest level in 20 months — the loftiest point of President Trump's second term in office.
The yield has climbed from a low of 4% at the start of the Iran war in March. Meanwhile, the 30-year Treasury yield has risen to 5.268%, from about 4.7% in early March.
Debt load and AI borrowing drive the selloff
Traders are focused on the U.S. national debt hitting $40 trillion, inflation concerns tied to the Iran war, and a wave of new debt issuance for the artificial-intelligence buildout. Sameer Samana, head of global equities and real assets at the Wells Fargo Investment Institute, said the pace of the rise in long-end rates over the past several months is probably a bit too fast.
The current level already sits above where yields stood before Treasury Secretary Scott Bessent's surprise market intervention in mid-August. According to MarketWatch: "I can appreciate what Bessent is trying to do — slow the ascent," Samana said.
Wall Street watches the 5% line
David Tam, U.S. rates strategist at BNY, said the Treasury market's functioning still appears orderly, with liquidity conditions broadly stable and bid-ask spreads relatively contained. He pointed to the 2022 U.K. debt minicrisis under former Prime Minister Liz Truss as the kind of forced deleveraging that would signal real trouble.
Ron Albahary, chief investment officer at LNW, said the 10-year yield trading consistently above 5% tends to push markets toward a risk-off backdrop, though he said the 4% to 5% range hasn't been a major concern since companies have adapted to those levels.
The pressure is already showing up in equities. The S&P 500 fell 0.8%, the Dow Jones Industrial Average dropped 0.83% and the Nasdaq Composite slid 1.12% on Tuesday, putting the three indexes on track for a third straight session of declines.
Still, Samana said investors aren't ready to trade double-digit stock gains for the roughly 5% now on offer in bonds.
Source: MarketWatch
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