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LivestreamMenuOne thing is clear to bond investors: The path for yields is to the upside. The 10-year Treasury yield on Thursday topped 4.7%, its highest level going back to January 2025 as an escalation in hostilities in the Middle East added to inflation fears. Oil prices spiked, with Brent crude futures climbing above $100 per barrel following news that Houthi rebels attacked tankers off the Red Sea coast of Saudi Arabia, and as the U.S. threatened to ramp up strikes. It’s not the last milestone rates are expected to break through. Treasury yields have already been elevated for much of this year on fears of a higher federal deficit, as government spending balloons in the U.S. and around the globe. The latest news on the warfront tacked on inflation to those worries. Also in the mix is the growing demand for credit during a historic period of investment in artificial intelligence . “We’ve been in a bond bear market since 2020, 2021, after a 40-year bull market, and the trend in rates and long rates over time is going to be higher,” said Peter Boockvar, investment chief at One Point BFG Wealth Partners. “And I do think the 10-year yield — now that it’s broken above its May high, and is now at its highest level since January 2025 — I think has its sights on retesting 5%,” he said. US10Y 1D mountain U.S. 10-year Treasury yield, 1-day The 10-year yield at 5% would be psychologically significant for the stock market. The last time the key benchmark touched those levels was briefly in October 2023, when it hit 5.021%. Before then, it was last above those levels all the way back in July 2007, before the financial crisis. At that level, the spike in yields may start cannibalizing demand from equities. Boockvar said he thinks that a sustained rise above 5% would be “hugely negative” for the stock market. In truth, investors can’t say for certain how high yields have to rise in order to significantly damage the stock market. Even with the 10-year yield topping 4.7% on Thursday, the S & P 500 is almost 3% off its all-time high. What could matter more for investors is the reason behind the climb, according to Steve Englander, global head of G10 FX research at Standard Chartered. A spike in yields driven by a worsening inflation picture could mean a punishing sell-off in equities, but any strong gains in productivity could act as a cap against upside in bond yields as well, he said. “Five [percent] will be a shocker when it hits, but what’s driving that 5% is really what matters after the first, you know, three days of headlines,” Englander said. “And if it’s something that’s positive, ultimately the stock market will recover.” To be sure, the 10-year Treasury yield will still need to close a gulf of 0.3 percentage point to reach 5%. But Englander said rapid ascents in Treasury yields have occurred often over the last several years, meaning the bond market is one exogenous shock away from closing the gap. “Those are the forces that you know they never seem likely, but they seem to happen with distressing frequency,” said Englander. CNBC’s Chris Hayes contributed reporting.Read More
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