Is 6% U.S. Treasury Yield the Biggest Risk for U.S. Stocks Now?

According to MarketWatch, global bond markets faced selling pressure on Tuesday (18th), continuing to weigh on equities. Major U.S. stock indices declined for the third consecutive trading session. A Wall Street strategist noted that equity investors may not yet be prepared for the next phase.

The 30-year U.S. Treasury yield briefly touched its highest level since June 2007 on Tuesday before slightly pulling back. In a report, BTIG technical strategist Jonathan Krinsky said that from a technical standpoint, the bond selloff could quickly worsen.

U.S. Treasuries have been under pressure since the Federal Reserve (Fed) began raising interest rates in the spring of 2022. However, since August, the 30-year U.S. Treasury yield—the longest-dated bond issued by the U.S. Treasury—has broken out of a three-year trading range. This suggests the bond selloff may not be over. Bond yields move inversely to prices; when bond prices fall, yields rise to attract buyers.

Krinsky stated, 'We believe the stock market is not prepared for a rapid rise in long-term yields, such as the 30-year U.S. Treasury yield moving toward 6%.'

Higher bond yields could negatively impact stocks in two ways. First, bonds become relatively more attractive to investors, potentially prompting capital to shift from stocks to bonds. Second, higher yields increase the discount rate used in analysts’ stock valuation models, thereby lowering the estimated fair value of equities.

That said, rising yields do not necessarily mean stocks will fall. In fact, since late 2022, despite an overall upward trend in yields, stock markets have continued to rise.

However, several periods of stock market weakness during this time coincided with sharp yield increases, the most notable being the S&P 500 correction in the fall of 2023.

Krinsky emphasized that not only the absolute level of yields but also the speed of their rise could pose a problem for equities.

Data from the X account Oddstats shows historical precedents where rapid long-term rate increases signaled stock market peaks. Oddstats noted that the only time in history the 30-year U.S. Treasury yield rose from around 4% to around 6% within six months was in June 1999. Less than four months later, the S&P 500 entered a correction phase.

Nine months later, the index hit its final record high before entering a multi-year bear market, as the dot-com bubble gradually burst.

According to FactSet, the 30-year U.S. Treasury yield was still below 4.6% as of March this year.

Of course, bond market pressure isn’t limited to the 30-year Treasury. The 10-year U.S. Treasury yield, a benchmark rate widely used for trillions of dollars in loans, rose as high as 4.747% during Tuesday’s session, the highest since January 2025.

Even as bond yields pulled back slightly on Tuesday, major U.S. indices declined. The S&P 500 fell 0.69% to 7,691.76, the Nasdaq Composite dropped 1.3% to 26,289.71, and the Dow Jones Industrial Average edged down 0.22%.