A U.S. bond selloff that began with the war with Iran has pushed the 10-year Treasury yield above 5%, a level it has rarely sustained in nearly two decades, lifting borrowing costs and putting stocks, government debt and dealmaking under scrutiny.
Higher Treasury yields make it costlier for companies to refinance debt and fund acquisitions and AI or data-center spending. Investment-grade credit spreads are near historically tight levels, leaving investors limited protection if conditions worsen, though higher bond yields could also attract buyers. Societe Generale's Albert Edwards says elevated stock valuations leave shares vulnerable to bad news; skeptics point to strong earnings and note that few buyers of leading tech stocks seek dividends.
Q2 nominal GDP growth was 6.56% year over year, while the 10-year yield touched 5% Monday; analysts say the growth cushion helps contain debt pressure but narrows if yields outpace growth. The Treasury's long-term real-rate average rose to 2.92% this week from 2.55% at the end of last year; TD Securities' Gennadiy Goldberg said real rates drove most of the recent rise in long-term yields. Some investors report lower buyer offers and say deal timelines could stretch by months.
