US bond yields have crept above a dangerous level that could signal weakness for stocks
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The bond market is warning that interest rates could remain high for longer.
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The yield on the 30-year U.S. Treasury note was above 5% on Tuesday as rate hike expectations grew.
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Investors worry that hot inflation will cause the Fed to pause rate cuts, which could hurt stocks.
bond market It sends a new warning to investors: Don’t expect a rate cut anytime soon.
That’s evident in the movement in Treasury yields, which have risen this week as markets weigh upside risks to inflation from the Iran war and raised expectations that the Fed will keep interest rates higher for longer.
30-year US Treasury yieldThe yield, a measure of long-term interest rate expectations, was hovering just above 5% on Tuesday. This marked the first time 30-year yields had surpassed a key psychological threshold since the summer of last year.
Inflation was the main driver of this movement. The fear hanging over the markets is that oil prices will rise. fuel inflation other parts of the economy may cause the Fed to pause its rate-cutting cycle and even raise rates To control the out of control price increase.
Higher rates risk tipping the balance outlook for stocks. Investors have been betting on rate cuts in 2026 for much of the past year; This has been a significant bullish catalyst for risk assets. As yields rise, investors are more likely to turn to bonds over stocks because they can earn a comparable return with much lower risk.
The odds that the Fed will raise interest rates by at least 25 basis points exceeded 35% on Monday and fell to 29% on Tuesday.
The probability of the Fed cutting interest rates in 2026 was around 8%, down from 20% a month ago.
Global strategists at JPMorgan said they see a risk that yields could rise after recent developments fed meetingCentral bank governor Jerome Powell has talked about the possibility of higher inflation.
Investors have previously said they believe downside risk to the job market will “outweigh inflation concerns for much of 2026,” adding that this would give the Fed more room to cut rates.
This week, all eyes are on employment data, which is expected to further guide the markets regarding the interest rate outlook. If unemployment Bank of America analysts wrote that the fact that the interest rate remains low indicates that the Fed will likely prefer to keep monetary policy restrictive while focusing on inflation.
“In contrast, a rise in the U-rate to 4.4% or higher would renew the Fed’s concerns.” labor market weakness. “But markets may not be ready to price in cuts until there is more clarity on the course of the Iran war,” analysts wrote, pointing to the upcoming April employment report on Friday.
