Christopher Wood, Global Head of Equity Strategy at Jefferies, warned in his weekly investor note GREED & fear that rising Treasury yields pose a short-term risk to the stock market, and reaching above 5% on the 10-year issuance is an obvious trigger for a stock market correction.
Wood noted that foreign investors who have the potential to sell large quantities of Treasury bonds could also sell significant amounts of US stocks. Currently, foreigners hold US stocks due to the strong history of artificial intelligence (AI), which has generated good returns, especially for those who invested in 'picks and shovels' sectors. However, the situation with US Treasury bonds is the opposite: they have been experiencing a brutal bear market since March 2020.
Meanwhile, the yield on 2-year US Treasury bonds rose by 5 basis points to 4.41%, and the 10-year rose by 3 basis points to 4.81% on Wednesday, up from 3.8% as of February 27, 2026. This occurred despite efforts by the US government to calm sentiment through a bond-buying program.
Analysts attributed the rise in yields to cautious investor sentiment as they prepared for US labor market data this week, as well as the resumption of geopolitical tensions in the Middle East, which triggered a spike in crude oil prices and a general decrease in risk appetite.
Furthermore, Nigel Green, CEO of deVere Group, stated that America's corporate sector is issuing debt at record rates to finance AI development, with borrowing related to data center expansion reaching 'hundreds of billions of dollars.' He emphasized that competition between public and corporate borrowers for a single pool of buyers is why investors are demanding higher compensation for holding long-term securities. In Green's view, US government intervention to reduce pressure on the Treasury is merely a temporary fix that does not address real and growing problems.
Fiscal Deterioration
Wood also believes that fiscal deterioration in the US is one of the factors putting upward pressure on long-term Treasury yields, as is the fact that nominal GDP growth has been maintained at 5.9% year-over-year for the last 12 quarters. Wood suggests that since nominal GDP growth significantly exceeds the 10-year Treasury yield level, it is a clear signal for further yield increases.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the rise in yields globally, especially in the US, is one of the key risks for global stock markets, including India. He added that if the 10-year yield reaches 5%, it could trigger a 'major correction' in global equity markets, which is a macroeconomic indicator that investors should closely monitor.
Ponmudi R, CEO of Enrich Money, suggested that the short-term technical outlook for Indian markets has also weakened, pointing to the Nifty index level of 23,800, which should be watched for downward movement. He also noted that levels of 24,000 and 24,200 remain key for Nifty to improve the short-term outlook.