10-yr U.S. Treasury Yields continue to create unease
May 29, 2025 9:52 AM
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SPY
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As of the U.S. market open on May 29, 2025, the 10-year Treasury yield climbed to approximately 4.52%, up from 4.47% at the close two sessions ago, marking a steady ascent from mid-April’s low near 4.17%. This move reflects renewed concerns over persistent inflation and diminishing odds of Federal Reserve rate cuts in 2025, with traders trimming expectations for policy easing after stronger-than-expected economic reports. Bond strategists have been revising their forecasts higher, signaling that yields could test the 5% threshold later in the year.
Rising long-term rates exert downward pressure on equities by increasing the discount rate used to value future corporate earnings, particularly hurting high-growth and technology stocks with heavy cash-flow in later years. Since the start of May, the S&P 500’s tech-heavy Nasdaq composite has underperformed broader indices, while financial shares—benefiting from wider interest margins—have outpaced the market. Moreover, higher yields have cooled recent risk appetite: after hitting fresh highs in early May, major benchmarks have experienced choppy trading and modest pullbacks as investors adjust to the evolving rate outlook.
Looking back over the past six weeks, the 10-year yield’s rise of over 35 basis points has coincided with elevated equity volatility, a rotation out of “bond proxy” sectors like utilities and consumer staples, and a defensive pivot into cyclicals and value names. Should yields sustain above 4.5%, expect continued valuation pressure on growth-oriented names and further sectoral shifts. Conversely, any re-test of lower yield levels could reignite broad-based rallies, underscoring the pivotal role of the 10-year rate in steering market sentiment.
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10-yr U.S. Treasury Yields continue to create unease
As of the U.S. market open on May 29, 2025, the 10-year Treasury yield climbed to approximately 4.52%, up from 4.47% at the close two sessions ago, marking a steady ascent from mid-April’s low near 4.17%. This move reflects renewed concerns over persistent inflation and diminishing odds of Federal Reserve rate cuts in 2025, with traders trimming expectations for policy easing after stronger-than-expected economic reports. Bond strategists have been revising their forecasts higher, signaling that yields could test the 5% threshold later in the year.
Rising long-term rates exert downward pressure on equities by increasing the discount rate used to value future corporate earnings, particularly hurting high-growth and technology stocks with heavy cash-flow in later years. Since the start of May, the S&P 500’s tech-heavy Nasdaq composite has underperformed broader indices, while financial shares—benefiting from wider interest margins—have outpaced the market. Moreover, higher yields have cooled recent risk appetite: after hitting fresh highs in early May, major benchmarks have experienced choppy trading and modest pullbacks as investors adjust to the evolving rate outlook.
Looking back over the past six weeks, the 10-year yield’s rise of over 35 basis points has coincided with elevated equity volatility, a rotation out of “bond proxy” sectors like utilities and consumer staples, and a defensive pivot into cyclicals and value names. Should yields sustain above 4.5%, expect continued valuation pressure on growth-oriented names and further sectoral shifts. Conversely, any re-test of lower yield levels could reignite broad-based rallies, underscoring the pivotal role of the 10-year rate in steering market sentiment.