Yields on long-dated US Treasuries are hovering at levels that could spell trouble for stocks and other asset classes, according to multiple market strategists.
HSBC reports that the 30-year Treasury yield hit 5.19% this week, the highest in 19 years, while the 10-year yield soared to 4.667%. The bank warns that US Treasuries are now firmly in the "Danger Zone"-levels that tend to pressure virtually all asset classes.
When bond rates rise, investors historically dump stocks and riskier assets for the safety of Treasuries. At a 4.6% yield, investors can earn solid returns with far less uncertainty.
HSBC suggests yields could move even higher as sticky inflation persists. The Consumer Price Index rose to 3.8% in April, above the 3.7% consensus, raising the possibility the Fed may hold or raise rates this year.
Interactive Brokers chief strategist Steve Sosnick says markets are flashing a "yellow alert," with sustained moves higher in yields likely to pressure stocks.
BMO Capital Markets strategist Ian Lyngen warns that if 30-year yields reach 5.25%, equity valuations could see a meaningful correction.
Currently, the 30-year yield is at 5.077%, and the 10-year is at 4.552%.