The 10-year Treasury yield topped 4.7% on Thursday, its highest level since January 2025, and one investment chief sees it heading toward 5%. A move to that mark would be negative for the stock market, though the impact may hinge on what is driving yields higher.
Bond investors now see only one direction for yields — up — after the 10-year Treasury yield topped 4.7% on Thursday, its highest level since January 2025. Peter Boockvar, investment chief at One Point BFG Wealth Partners, expects long rates to keep climbing: “the trend in rates and long rates over time is going to be higher.” He said the yield now has its sights on retesting 5%.
Why yields keep climbing
Treasury yields have 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 escalation in Middle East hostilities added inflation to those worries, as Brent crude futures climbed above $100 per barrel after Houthi rebels attacked tankers off the Red Sea coast of Saudi Arabia and the U.S. threatened to ramp up strikes. Growing demand for credit during a historic period of investment in artificial intelligence sits in the mix as well.
What 5% would mean for stocks
A 10-year yield at 5% would be psychologically significant for the stock market. The benchmark last touched that level briefly in October 2023, when it hit 5.021%. Before then, it had not traded above 5% since July 2007, ahead of the financial crisis.
At that level, rising yields may start to cannibalize demand from equities, and Boockvar thinks a sustained move above 5% would be deeply negative for stocks. Yet even with the 10-year topping 4.7%, the S&P 500 sat roughly 3% off its all-time high, and investors cannot say for certain how high yields must climb to seriously damage stocks.
The driver matters more than the number
For Steve Englander, global head of G10 FX research at Standard Chartered, what drives the climb matters more than the level. A spike driven by a worsening inflation picture could mean a punishing sell-off in equities, he said, while any strong gains in productivity could cap the upside in yields.
The 10-year still needs 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, leaving the bond market one exogenous shock away from closing the gap.
Source: CNBC
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