Wall Street has spent weeks trying to make peace with the great bond selloff. A surprisingly weak jobs report gave markets a brief reprieve Friday, sending stocks higher and Treasury yields lower. The bond rally didn’t last long, leaving investors confronting the question: what if borrowing costs refuse to come down?
There is already evidence of that: housing remains stuck, consumer credit is more punishing, and weaker borrowers pay dearly. "There’s a giant dichotomy between Main Street and AI/capex," said Brad Conger, chief investment officer at Hirtle & Co. The 10-year Treasury yield was around 5.27% late Friday. Despite Friday’s gains, the S&P 500 clocked a 0.3% loss.
"I don’t think there’s an inflection point where everything trips, but we’re in the zone where certain sectors are feeling the pain," Conger said, pointing to housing and credit cards. Nancy Tengler at Laffer Tengler Investments is sanguine, adding Nvidia Corp., Micron Technology Inc., and Meta Platforms Inc. Bond ETFs captured 42% of all ETF flows in September.
"So the higher yields will bite hard only if they persist for a very extended period," said Max Gokhman at Franklin Templeton Investment Solutions. The real issue is how long rates stay this high.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing