U.S. 10-Year Yield Hits 4.82% Before Pullback... "5% Is the Tipping Point for Stocks"

BlackRock: "Long-Term Yields Have Room to Rise Further"
Upward Pressure Stems from Oil Prices, Fiscal Deficit, and Other Complex Factors
"5% Is the Turning Point for Equities"

On September 2 (local time), the yield on the U.S. 10-year Treasury note reached 4.82% during intraday trading, marking a new high since November 2023. Later, as international oil prices pared their gains, bond yields also gave back part of the earlier surge.

Federal Reserve (Fed). Reuters Yonhap News Agency

Analysts say that the continued rise in long-term Treasury yields is driven by multiple factors, including higher energy prices due to the Iran war, expectations of further rate hikes by the Federal Reserve (Fed), the U.S. fiscal deficit, and increased corporate bond issuances amid the artificial intelligence (AI) investment boom.

According to reports from the Wall Street Journal (WSJ), Bloomberg, and other foreign media that day, the 10-year U.S. Treasury yield soared to 4.817% during trading, reaching the highest point since November 1, 2023. The 30-year yield also climbed as high as 5.302%, approaching the 19-year peak recorded last month.

However, after West Texas Intermediate (WTI) crude oil prices dipped below $90 per barrel and the wave of bond selling eased somewhat, the 10-year yield pulled back to around 4.78% and the 30-year yield to around 5.25%.

Complex Drivers Behind Rising Yields: Fiscal Deficit and AI Investment Add Pressure

Market participants point to not just surging oil prices but also structural factors such as the expansion of AI investment and the government’s fiscal deficit as underlying causes of the recent sharp rise in Treasury yields. BlackRock Investment Institute analyzed that, amid mounting energy costs and inflationary pressure from Middle East conflicts, the expansion of AI investment and increasing fiscal deficits are intensifying competition for capital.

In particular, as investment in AI data centers and power and semiconductor infrastructure has surged, the private sector is generating massive funding demand, creating an environment where governments and corporations must compete for limited capital.

The U.S. government’s fiscal burden is another factor pushing yields higher. U.S. national debt has surpassed $40 trillion, with the fiscal deficit remaining at high levels. As bond issuance increases, investors demand higher yields in exchange for holding long-term Treasury notes. BlackRock noted that, due to these structural shifts, there is room for long-term yields to rise further.

U.S. Treasury Secretary Scott Bessent emphasized growth as a solution to debt issues at the G20 finance ministers and central bank governors’ meeting. “The only way out of this situation is through growth,” he said. However, the WSJ pointed out that, given the enormous federal deficit and high borrowing costs, it will not be easy to reduce the debt burden through growth alone.

Global Bond Sell-Off Continues... "5% Is the Turning Point for Equities"

The wave of bond selling has not been limited to the United States but has spread across major economies. Japan’s 10-year government bond yield surpassed 3%, reaching its highest level in nearly 30 years since 1996. German yields also climbed to their highest since 2011, while long-term yields in the UK and France reached their highest points in several to several tens of years. Elevated energy prices, government debt, and the outlook for further rate hikes have simultaneously impacted global bond markets.

The market now sees a 5% yield on the 10-year U.S. Treasury as a critical inflection point. Foreign media report that as the yield approaches 5%, investors holding both stocks and bonds are increasingly feeling the strain.

When government bond yields rise, even traditionally safe assets like bonds can offer attractive returns, making stocks less appealing. This leads to a lower valuation of corporations' future earnings, which in turn increases downward pressure on stock prices.

This content was produced with the assistance of AI translation services.