U.S. Treasury Yields Hit 5.2% as Markets Fear Spillover Effects
Global stock markets remain calm despite surging U.S. Treasury yields hitting 5.2%, but experts warn of potential spillover effects and rising risk levels in bond markets.
Global stock markets have shown relative calm despite tumbling U.S. Treasury prices and record-high yields reaching 5.2%. However, experts like Tony Pasquariello, head of hedge fund coverage at Goldman Sachs, warn that the waning effect of positive corporate earnings could eventually pull equities down.
The Bond Market Risk
"If you were to ask me what the biggest and most immediate risk factor is for the stock market, I would point to the bond market," Pasquariello said. While the S&P 500 rose 0.4% and the Nasdaq climbed 2.5% over the past month, European indices entered negative territory, with Paris's CAC 40 dropping 3% and Germany's DAX falling 3.6%.
"With that said, I believe the issue of debt and deficits, a topic that tends to fluctuate in market priority, is now squarely in the crosshairs of investor attention," Pasquariello noted.
Spillover Effects in Local Markets
The rising yields on U.S. government bonds provide a solid alternative for investors, potentially triggering a sell-off in equities. Fixed-income investors are already feeling the pressure, with Israeli government bond indices, such as Tel Gov-General, recording sharp intraday drops of 0.3% to 0.4% at the start of the trading week.
