Rising bond yields put pressure on the stocks powering the market

By John Towfighi, CNN

New York (CNN) — Global bond yields are up sharply in recent weeks and US oil prices are near $90 per barrel. Now, the stock market is also starting to feel some pressure.

The 10-year US Treasury yield rose above 4.81% early Wednesday and hit its highest level since October 2023. The yield surpassed the peak set in January 2025.

The rise in yields is a global phenomenon. Bond yields in France, Germany, the United Kingdom and Japan are at multi-year or multi-decade highs.

Yields rise when bond prices fall. Investors are selling bonds, pushing up yields, as they reckon with inflation nerves and the prospect of central banks raising interest rates. Longstanding concerns over government deficits are also contributing to higher yields.

Bond yields help set interest rates across the economy. A steep rise in yields can push up the cost of mortgages, auto loans and other borrowing, putting pressure on consumers. In an economy defined by consumers feeling glum about affordability, higher yields can exacerbate concerns.

A rise in bond yields can also be a restraint on stocks. That matters specifically for the high-flying tech stocks that have powered the market higher in recent years.

The tech-heavy Nasdaq Composite is down almost 4% since its last record high in June. With earnings season winding down, investors are turning their attention back to factors like what’s going on in bond yields and nerves about higher interest rates.

The 10-year yield jumped Tuesday and the Nasdaq fell 1%. Nasdaq 100 futures were set to open down just 0.2% on Wednesday.

Bond yields help set interest rates for corporate America. A steep rise in yields can push up costs for companies that depend on borrowing, like the tech companies relying on debt to fund the AI infrastructure buildout.

As tech companies have ramped up that borrowing, the rise in yields can have more acute pain for their outlook, according to Tom Tzitzouris, head of fixed income research at Baird Strategas.

Investors prefer low rates, when borrowing is cheaper and companies’ outlooks become more attractive. A steep rise in yields can also alter calculations for companies’ future earnings and stocks’ values. That matters for tech stocks with high growth forecasts but a riskier outlook.

Higher yields on trustworthy government bonds can also pull investors away from more volatile investments like stocks.

Bond yields have climbed this year as investors assess the outlook for inflation and central bank interest rates, concerns over government deficits and a deluge of corporate bond supply to fund the AI buildout.

“All [investors] care about is the impact higher rates will have on the economy…and on the valuation levels of many key stocks,” Matt Maley, chief market strategist at Miller Tabak + Co, wrote in a note. “The stock market can ignore higher yields for many months…but eventually they do have a negative impact.”

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