T-Yields Closer to Turning Positive, Stocks Could Get Hurt Most

Tightening has become a noteable key word across financial markets, as US government bond yields extended recent gains on Wednesday, with growing evidence that the Fed is planning to rapidly raise interest rates and reduce its bond-holdings lifting the 10-year Treasury yield above 2.6%.

Yields, which rise when bond prices fall, have been climbing for most of the year but have taken another big leg up this week based on speeches from Fed officials and minutes from the US central bank’s 15-16 March meeting.

Treasury Yields are extending their uptrend through the fourth session in a row. Expectations for a rapid removal of central-bank stimulus lift 10-year Treasury yield near 2.6%. An inversion of the US Treasury yield curve has been seen as a recession warning sign for decades, and it looks like it is about to light up again.

As Treasury yields are surging, nearing a worrisome point for the stock market, the most expensive stocks, like Tesla and Amazon.com, are likely to get hurt the most.

Markets have been especially focused on Treasuries’ real yields lately as they are expected to remain on an upward path in the near term. A bond’s real yield is its nominal yield minus the expected average annual rate of inflation.