The 30-year Treasury yield rose to its highest level since 2004 on Thursday as stocks fell, raising questions about whether volatility in bond yields could prompt a larger pullback in stocks.
The 10-year Treasury yield (^TNX), a benchmark for mortgage rates and loans, hovered near its 2007 highs while the 30-year Treasury (^TYX) yield stood at 5.4% Thursday morning. Meanwhile, stock futures fell.
The move comes as oil prices climbed toward $100 per barrel after President Trump signaled support for a US diesel export ban. Business activity data that came in hotter-than-expected fueled concerns about persistent inflation.
The main driver behind rising rates is “the US economy is booming,” said Ed Yardeni of Yardeni Research in a note.
Notably, the US dollar has risen to an 8-week high, also contributing to downbeat sentiment.
“The run-up in the dollar, I think, is associated with negative risk sentiment. And so I think that’s affecting equities as well,” Steve Englander, Standard Chartered’s co-head of FX Research, told Yahoo Finance.
Hawkish remarks from Fed governor Michael Barr also raised expectations of tighter monetary policy among Fed officials. Investors raised their bets on another Fed rate hike in October to 70%.
“There is a sense that the Fed and central banks globally are not willing to tolerate another inflationary shock,” Englander added.
A look at a year-to-date chart from Yahoo Finance AlphaSpace data shows a steady rise in long-dated bonds as investors price in more Fed rate hikes,
The declines in the stock market so far have been measured. Nasdaq Composite (^IXIC), which posted back-to-back records earlier this week, fell 1% on Wednesday. Most of the declines have been centered around interest rate-sensitive sectors like Utilities (XLU), Real Estate (XLRE), and Financials (XLF).
“So far, stocks have continued to shrug off bad news in the most surprising ways,” said Dean Lyulkin, president of lending company Cardiff.
The question is whether stocks can keep shrugging off higher rates.
Another hike “could create further strain for already constrained, interest-sensitive sectors while doing little to slow the AI-led investment surge, though it could increase the risk of a stock market correction,” said EY-Parthenon Chief Economist Gregory Daco.
BofA analysts said long-end yields have “normalized” to pre-Great Financial Crisis levels. But government net interest expenses, or the cost of servicing the debt, “are at a record high,” reaching 3.3% of GDP in the second quarter of 2026.
