"Rising Treasury yields are the biggest challenge to this bull market. Here are the ‘trigger levels’ to watch."

8%.

If you see 8% on the 10-year note you'll know it's all over and time to tell your family you love them as you brush up on your woefully inadequate hunting and foraging skills.

From MarketWatch, December 30:

Investors hoping for a Santa Rally have so far been disappointed. Stock index futures indicate Wall Street will struggle to recover Monday following a 1.1% dip for the S&P 500 at the end of last week.

One cause for the caution is rising bond yields. The benchmark 10-year Treasury yield closed Friday at its highest level in seven months, having jumped nearly a full percentage point since September despite the Federal Reserve cutting its benchmark interest rate. Concerns that President-elect Donald Trump’s tariff and tax-cut policies may exacerbate inflation, while a burgeoning government deficit increases bond supply, have put downward pressure on bond prices.

This may continue to be a problenm for equities in coming months, according to a team of Evercore ISI strategists led by Julian Emanuel. “Long term, earnings drive stocks; however, there are times when rising long term yields can exert medium-term pressure on equities even as the backdrop remains favorable,” says Emanuel in a note published Sunday.

Evercore ISI

And he continues: “As 2025 begins, rising long end bond yields pose the biggest challenge to the bull market. Indeed, the latest surge in the 10-year yield helped spur a bout of equity market volatility after 12/18’s Federal Open Market Committee [meeting].”

There are many reasons why benchmark yields may pull back a bit in coming days after their strong surge higher, Emanuel reckons, including elevated Treasury short positions being exited, and the potential for an easing of geopolitical tensions in oil-sensitive areas, which would trim inflation concerns.

However, those aforementioned Trump policies, fiscal deficit factors, and possibly reduced buying of Treasuries by China and Japan, will pressure yields higher in the medium term, so that rising bond and equity market volatility are Emanuel’s base case for the start of the year.

And the important thing to remember is that “yield pressure is agnostic to stock prices, occurring when valuations are not extended (2018) and when they are (1994, 2022),” he says....

....MUCH MORE

Keeping in mind that tariff induced inflation should be a one-off and thus transitory, the place to focus is whether or not the central bank plays ball with the Administration and resumes buying Treasury issuance or if they let rates rise as more and more paper floods the market leading to a Havensteinian hellscape made more sinister, and perhaps more protracted, by the lights of perverted science... [hmmm, don't know why Churchill popped in for a visit there at the end of the para.]

Anyhoo, the good news is: bonds have strengthened a bit this morning with the yield on the 10-year declining from Friday's 4.6190% to  4.588% last I saw.

Previously:

October 21 - "Treasury 10-Year Yields May Hit 5% in Six Months, T. Rowe Says"

December 18 - "T. Rowe Price Warns Treasury Yields Could Hit 6%"