"Fears of Sharp Stock Decline if U.S. 10-Year Treasury Yield Surpasses 5%" [Weekend Money]

Global Financial Markets Rattled by Surging Sovereign Bond Yields
"Stock Market Corrections Accelerate Amid U.S. Fiscal Soundness Concerns"

With a sharp rise in market interest rates triggering a correction in global stock markets, analysts have pointed out that a 5% yield on the U.S. 10-year Treasury could become a psychological threshold for equities.

According to NH Investment & Securities on September 5, the resumption of hostilities between the United States and Iran has dampened expectations for normalization in the Strait of Hormuz, pushing up international oil prices by more than 5% based on West Texas Intermediate (WTI) crude, with prices entering the $90 range. As a result, global long-term bond yields have been under upward pressure, and recently, the yield on the U.S. 10-year Treasury exceeded 4.8%, reaching its highest level in two years.

As both oil prices and interest rates surged, the domestic stock market also experienced a sharp decline. Despite large-scale share buybacks by Samsung Electronics and SK hynix, heavy selling from foreign and institutional investors continued, failing to support the index from further drops.

Experts expressed concerns that a sustained breach of 5% by the U.S. 10-year Treasury yield could trigger a steep correction in equity markets. Lee Sangjun, a researcher at NH Investment & Securities, said, "The market expects the U.S. 10-year yield, which has surpassed 4.8%, to test the 5% level, a peak reached in 2023 when the Federal Reserve raised the policy rate upper bound to 5.5%," adding, "Should the yield climb past 5% and continue rising, concerns over government debt ratios and fiscal soundness could add to downward pressure on stock prices."

However, Lee noted that if the U.S. 10-year Treasury yield exceeds 5%, immediate intervention from the U.S. government could take place, suggesting that U.S. authorities would not simply stand by if rates surge. He also predicted that key U.S. economic indicators, due to be released ahead of the September Federal Open Market Committee (FOMC) meeting, would help alleviate concerns related to rising rates.

Lee added, "The fundamentals of the Korean semiconductor sector remain intact," explaining, "The daily average growth rate of semiconductor exports in August reached a record 216%, and the stronger AI infrastructure demand outlook from Dell Technologies in the U.S. is also positive for the domestic semiconductor market." He went on to say, "In the short term, increased volatility in stock prices is inevitable due to higher interest rates, but with U.S. government intervention, stabilization supported by confirmed economic indicators, and robust fundamentals centered on semiconductors, the KOSPI index is expected to regain upward momentum."

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