Although the US equity markets appear to be gravity-defying, rising risk-free rates (10-year US Treasury yields) would inevitably impact equities at some point. Although the Fed set US short-term rates, and Kevin Warsh, the new US Fed chair is under pressure to cut rates, the longer-term Treasury yields move with inflation expectations, economic growth expectations, and government borrowing needs.
In the US, the yield on two-year Treasuries climbed to 4.06%, a level not seen since March 2025. Bloomberg notes that Japan’s 30-year yield hit 4% for the first time since 1999. A political crisis in the UK lifted 30-year gilt yields to a 28-year high. The yield on 30-year Treasuries of 5.10% is the highest in 10 years. The 10-year US Treasury yield is at a two year high of 4.5497. In the meantime, both gold and silver fell. No surprise then that equity markets in the Asian timezone were a sea of red on May 15.
“The selloff deepened heading into the weekend as Brent crude’s climb past US$109 a barrel compounded worries sparked by back-to-back US inflation reports and the ongoing conflict between the US and Iran. Along with wagers on Federal Reserve rate hikes, policy tightening bets are also gaining traction in Japan, where producer prices jumped by the most since 2014,” Bloomberg reports.
