5% US Treasury yield loses its deterrent effect, market begins to speculate on 6%

BlockBeats news, September 24: The U.S. 10-year Treasury yield has returned to 5%, but the cryptocurrency market and global stock markets have not seen severe sell-offs, and Wall Street's stress threshold for interest rate risk is gradually shifting upward from 5% to the 5.5% to 6% range.

Mike Bell, head of market strategy at BlueBay Asset Management, said there is no absolute "magic level" that triggers sell-offs; the key lies in the relative premium between U.S. Treasury yields and the earnings returns on risk assets. As risk-free yields continue to rise, if corporate earnings do not expand in tandem, the equity risk compensation will continue to be compressed.

JPMorgan's recent communications with large institutions found that investors generally believe the yield level that could truly force a full-scale repricing of stocks has shifted upward from 5% to 5.5% to 6%. The rising share of AI, advanced manufacturing, and high-end services has also given some high-growth companies more abundant cash flow, thereby weakening the short-term impact of high rates on corporate investment.

However, financing costs above 5% may still have a lasting impact. Paul Jackson, head of global asset allocation research at Invesco, pointed out that when the 12-month moving average of the 10-year U.S. Treasury yield rises above 4.72%, global stock markets often begin to come under substantial pressure. That average is currently about 4.34%.

Federal Reserve official Goolsbee also warned that a short-term touch of 5% in yields and a sustained stay above 5% are two different things, and persistently high financing costs could eventually erode corporate budgets and capital expenditures. Neil Birrell, chief investment officer at Premier Miton, said the current calm in the market partly stems from the fact that institutional earnings models have not yet fully incorporated a long-term discount rate above 5%, and the real pressure may emerge when the market broadly reprices distant cash flows.