Investor optimism about U.S. stocks has declined: Treasury yields at their highest level since 2007 are to blame
The yield on 10-year U.S. Treasury bonds remains above 5%
Investors are growing concerned as U.S. bond yields rise to their highest levels in a couple of decades / Photo: godongphoto/Shutterstock.com
Investors in the U.S. market have begun to worry about rapidly rising yields on U.S. Treasury bonds, according to a survey of fund managers conducted by Bank of America, Yahoo Finance reports. The survey results were published on Tuesday, September 15. On that day, the yield on 10-year Treasuries reached its highest level since 2007 after surpassing 5% the previous day for the first time since 2023, the Financial Times noted.
The percentage of fund managers who are optimistic about stocks (overweight) in the BofA survey fell to 49% from 57% in August, according to Yahoo Finance. The proportion of cash in their portfolios, by contrast, rose during the same period from 3.5% to 3.9%—the sharpest monthly increase since March, the publication notes.
For the first time, fund managers identified a “chaotic bond sell-off” as the main tactical risk to the markets. At the same time, those surveyed by BofA remain positive about corporate earnings, the investment cycle in artificial intelligence, and the pace of economic growth.
Lee Manson, President and Chief Investment Officer at Portfolio Wealth Advisors, believes that as yields approach the psychological threshold of 5%, the logic behind capital allocation changes. “When the yield on 10-year bonds approaches 5%, it becomes more attractive for an investor to put their next marginal dollar into long-term government bonds than to try to predict what Micron’s earnings will be next quarter,” he said during an appearance on Yahoo Finance’s “Opening Bid.”
Treasury yields are rising in September in tandem with rising oil prices: this is fueling concerns that inflation will remain well above the Federal Reserve’s (Fed) 2% target, Yahoo Finance added.
“The scope for a decline in long-term yields is fairly limited, given that there are no signs of weakness in the real economy and supply and market dynamics in the Treasury market are very different from those in 2007. Structural demand for Treasuries, especially among foreign investors, is significantly weaker,” said Phoebe White, head of U.S. interest rate strategy at UBS Group, as quoted by Bloomberg.
This article was AI-translated and verified by a human editor
