Recently one of the main topics in the financial markets has been the rising yields on US Treasury bonds, which is making the US yield curve steeper. This phenomenon is a negative factor for the stock markets - after all, an alternative to investing in stocks appears on the debt market. Many market participants agree that it is not the growth itself (in basis points) that is decisive here, but the pace of growth - and yields have been rising very dynamically in recent days.
The 10-year Treasury yield today reached 1.49% and exceeded the estimated S&P 500 dividend yield. What does this mean? Until recently, the premium for taking risk on the stock market was the dividend yield exceeding the bond yield. Currently, stocks have lost this advantage. Of course, this does not mean literally that investing in bonds will in any case be more profitable than the stock market, because it is only about sharing profits with shareholders in the form of dividends - there are other factors that should be taken into account, such as the growth rate of corporate profits resulting from economic growth etc. However, this does not change the fact that the increase in the profitability of the 10-year Treasury yield to 1.50% already raises serious concerns about the further development of this situation.
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Source: Bloomberg (via zerohedge)
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