U.S. Treasury Yield Surge Threatens Stock Market

The U.S. Treasury market has been experiencing significant fluctuations, with the 10-year Treasury yield steadily rising. According to recent analysis, if the yield increases by approximately 60 basis points within a month to reach 4.75-4.80%, it could exert substantial pressure on the U.S. stock market. This is not just about the absolute level of yields but also the speed at which they rise.

On May 23, U.S. stock futures continued to decline in pre-market trading, following a sharp drop in U.S. Treasuries the previous day. This trend aligns with the morning's rise in U.S. Treasury yields. Data indicates that yields have surged following the Senate's passage of a significant legislative package. Currently, the 10-year Treasury yield is around 4.520%.

Global bond markets, including those in Japan and the U.K., have also seen increased volatility, further driving up yields worldwide. Investors are now closely watching to see when the stock market will react to these rising yields. According to the analysis, the answer is imminent. When the 10-year Treasury yield rises by two standard deviations within a month, reaching approximately 60 basis points to hit 4.75-4.80%, it could significantly impact the stock market. Historically, both the absolute level of yields and the rate of increase have influenced stock market performance.

This means that if the current upward trend in Treasury yields continues, it could soon reach a critical level that affects the stock market. In other words, we are already very close to this critical point. The recent developments in the U.S. Treasury market have raised concerns about the potential impact on the U.S. stock market. Research indicates that when the 10-year U.S. Treasury yield rises by two standard deviations within a month, approximately 60 basis points to reach 4.75-4.80%, it could significantly affect the stock market. Historically, it is not just the absolute level of yields but also the rate of increase that has influenced stock market performance.