U.S. Treasurys are now firmly in the ‘danger zone,’ strategists say
A trader works at his desk at the New York Stock Exchange (NYSE) on May 19, 2026 in New York.
Timothy A. Clary | Afp | Getty Images
HSBC said the US Treasury had entered a “danger zone” as a rise in long-term yields raised fears that sticky inflation and hawkish rate expectations could begin to spread into stocks and broader risk assets.
The selloff in government bonds intensified on Tuesday, sending the 30-year Treasury yield rising above 5.19%, its highest level since 2007. Meanwhile, the benchmark 10-year bond yield rose to 4.69%.
As of 21:10, 30-year yields were up just under 1 basis point at 5.184%. ET’s 10-year return is at 4.667%.
“U.S. Treasuries are now firmly in the Danger Zone – the 10-year UST level that tends to weigh on nearly all asset classes,” HSBC strategists wrote in a note late Tuesday, warning that further repricing of terminal interest rate expectations could push yields “further into the Danger Zone, possibly causing risk assets to decline temporarily.”
The bank said markets have remained relatively resilient so far as corporate earnings growth remains strong, valuations have partially adjusted before recent tensions in Iran and investors still believe the conflict in the Middle East will mostly only affect oil.
The moves in yields are psychologically significant, especially after the 30-year Treasury yield rose above 5% for the first time since 2007, according to Steve Sosnick, chief strategist at Interactive Brokers.
Current market conditions are a “yellow alert” rather than a “red alert,” Sosnick said, adding that a move toward 4.65% on the 10-year yield or 5.5% on the 30-year bond could trigger more severe market stress.
Further moves could also start to affect stocks, according to BMO Capital Markets strategist Ian Lyngen.
If 30-year yields rise to 5.25% in the coming weeks, there will be a more permanent decline in stock valuations, he said.
