Treasury yields face 4.8% test as fiscal risks threaten to spill into other assets
Treasury yields face a test at 4.8%, with a sustained move above that potentially creating "meaningful problems" for other asset classes, said Miller Tabak.
TL;DR
- Treasury yields face a key test at 4.8%, with a sustained move above this level potentially causing "meaningful problems" for other asset classes.
- Rising fiscal deficits, massive debt issuance, and heavy corporate borrowing are pressuring long-term yields.
- Verbal interventions by U.S. Treasury officials have so far failed to lower rates.
- A disorderly rise in long-term Treasury yields could lead to repricing across assets like ultra-long-duration bonds, high-valuation growth stocks, and commercial real estate.
- Fiscal challenges are not limited to the U.S., affecting Japan, the U.K., France, and other developed economies.
- Any near-term decline in yields may not resolve the longer-term problem without significant fiscal changes.