Causes of US 10-Year Treasury Yield Breaking 4.75% and the Impact of Middle East Geopolitical Risks on the Stock Market

The US 10-year Treasury yield has surpassed 4.75%, injecting tension into global financial markets. This is the result of resurging inflation fears driven by spiking oil prices and an escalating geopolitical conflict between the US and Iran, which has stimulated a preference for safe-haven assets.

Two Key Drivers Behind the 4.75% Treasury Yield

The recent weakness in the bond market (rising yields) is primarily driven by inflation and geopolitical risks.

• Surging Global Oil Prices and Inflation Fears: A combination of production cuts by oil-producing countries and expectations of demand recovery has caused global oil prices to spike again. This diminishes expectations for interest rate cuts by the Federal Reserve and acts as a core factor pushing long-term bond yields higher.
• Escalating Middle East Geopolitical Crisis: Rising military tensions between the US and Iran are spreading fears of a wider conflict in the Middle East. This raises concerns about crude oil supply chain disruptions, creating a vicious cycle that further fuels rising oil prices.

Impact on the Stock Market and Crypto Assets

The US 10-year Treasury yield serves as a benchmark for global asset pricing. As the yield crossed 4.75%, massive profit-taking emerged, particularly in tech-heavy indices like the Nasdaq, leading to a highly volatile market environment. Risk-off sentiment is also strengthening in the cryptocurrency market, with assets like Bitcoin experiencing noticeable declines due to their vulnerability to high interest rates.

Frequently Asked Questions (FAQ)

Q. Why do stock prices fall when Treasury yields rise?

When Treasury yields rise, corporate borrowing costs increase, and the discount rate applied to future earnings climbs, making stocks (especially growth stocks) relatively less attractive. Furthermore, investors tend to move capital away from riskier assets like equities and into safer bonds that offer higher guaranteed returns.

Q. Is the possibility of a rate cut in the second half of the year completely gone?

It is too early to say definitively. However, if inflation indicators (such as CPI and PCE) do not show a clear downward trend and oil prices remain high due to Middle East risks, it is highly likely that the Federal Reserve will delay cutting its benchmark interest rate further than the market expects.