The yield on the 10-year US Treasury, a key indicator of long-term interest rates, is approaching the 5% level for the first time in about two decades, and attention is focusing on the potential impact if it breaks through this threshold. As the sell-off in US Treasuries that began with the war in Iran continues, some analysts are concerned that rising borrowing costs could increase the burden on companies and consumers, potentially hurting the stock market. On the other hand, there is a persistent view that the AI-related investment boom is supporting the market, and that the rise in yields reflects strong demand for funds and a robust economy. Additionally, with the US leading advanced economies in expanding fiscal spending, budget deficits have widened, and government debt has surpassed $40 trillion, leading some to point out that the current sell-off in Treasuries could be a precursor to even greater turmoil. Key points to watch include rising corporate borrowing costs, the impact on equity valuations, the relationship between yields and GDP growth, rising real interest rates, and headwinds for the M&A market.
US long-term yields approaching 5% indicate rising interest rates, which is positive for the yield itself.
