The US 10-year Treasury yield briefly crossed 5% this month, prompting investors to ask whether 6% could become a more important market stress point. JPMorgan says the stock-market breaking threshold may now be 5.5%-6%, but the brief move has not tested that view.
BlueBay Asset Management strategist Mike Bell said 5% is not a fixed trigger: the risk depends partly on Treasury yields relative to measures such as stocks’ earnings yield, a relationship he says is nearing an inflection point. JPMorgan cited continued spending by AI, healthcare and services firms as a reason borrowing costs may constrain markets less. Historically, MSCI’s main world stock index halved the last time the 10-year yield broke 5%, just before the global financial crash, and suffered a similar slump when yields neared 6.8% before the dotcom bubble burst.
Invesco’s Paul Jackson estimates global stocks start to fall when the 10-year yield averages 4.72% over 12 months and then rises; the current average is about 4.34%. He has reduced stock exposure and shifted some money into government bonds. A 6% yield would imply significantly higher inflation expectations, concern over US fiscal sustainability, expectations that rates stay elevated for years, or a mix. Emerging-market bond funds saw their biggest outflow in months last week, with billions also withdrawn from equity funds; Allspring’s Alison Shimada said nothing was going “horribly wrong” for now and remained constructive.
