Stock market: Rising US bond yields to trigger selloff? What Emkay says
The US economy and market structure have changed materially since the last such episodes, making history a less reliable guide, the brokerage said adding that it remained relatively constructive on equities.
- Aug 28, 2026,
- Updated Aug 28, 2026 8:51 AM IST
Emkay Global in its latest global strategy note said the stock market is increasingly focused on 10-year US bond yields above 5-5.25 per cent as potential equity sell triggers. It said while higher yields can cause temporary disruptions, it sees limited historical parallels.
The US economy and market structure have changed materially since the last such episodes, making history a less reliable guide, the brokerage said adding that it remained relatively constructive on equities.
Data showed the US benchmark S&P 500 has more than tripled since its Covid lows and risen 2.4 times since end-2019, supported by an extraordinary US fiscal-led global growth-reflation reset, resilient household and corporate balance sheets, and the growing dominance of globally diversified, asset-light, and cash-generative US Tech.
"Higher leverage has not translated into weaker earnings, while any effective cap on yields could further support equity multiples. The bigger risk, in our view, is bond-market volatility rather than higher yields per se. Even so, our bias remains to the upside: growth may again matter more than the absolute level of yields—as it did in the 1990s, when the UST 10Y averaged 6.65 per cent during a decade of strong equity returns," Emkay said.
Emkay said the renewed bear-steepening in developed market (DM) curves has fundamental backing and is unlikely to be easily reversed. Fiscal excess, structurally higher real rates, AI-led capital demand, and hawkish policy repricing are keeping pressure on long-end US bond yields.
It believes treasury buybacks may contain symptoms but not resolve the underlying US funding problem. Thus, we remain cautious on bonds, with UST volatility posing a bigger cross-asset risk than higher yields alone.
"The resulting policy unpredictability is cyclically USD-negative (and gold-positive), but we remain medium-term neutral-to-positive on dollar given the absence of credible reserve-currency challengers and continued US growth and capital market dominance. Equities, meanwhile, may prove more resilient to higher yields than conventional playbooks suggest: strong balance sheets, robust earnings, and growing weight of globally diversified, cash-generative US Tech indicate growth could matter more than absolute level of rates," Emkay said.
Emkay Global in its latest global strategy note said the stock market is increasingly focused on 10-year US bond yields above 5-5.25 per cent as potential equity sell triggers. It said while higher yields can cause temporary disruptions, it sees limited historical parallels.
The US economy and market structure have changed materially since the last such episodes, making history a less reliable guide, the brokerage said adding that it remained relatively constructive on equities.
Data showed the US benchmark S&P 500 has more than tripled since its Covid lows and risen 2.4 times since end-2019, supported by an extraordinary US fiscal-led global growth-reflation reset, resilient household and corporate balance sheets, and the growing dominance of globally diversified, asset-light, and cash-generative US Tech.
"Higher leverage has not translated into weaker earnings, while any effective cap on yields could further support equity multiples. The bigger risk, in our view, is bond-market volatility rather than higher yields per se. Even so, our bias remains to the upside: growth may again matter more than the absolute level of yields—as it did in the 1990s, when the UST 10Y averaged 6.65 per cent during a decade of strong equity returns," Emkay said.
Emkay said the renewed bear-steepening in developed market (DM) curves has fundamental backing and is unlikely to be easily reversed. Fiscal excess, structurally higher real rates, AI-led capital demand, and hawkish policy repricing are keeping pressure on long-end US bond yields.
It believes treasury buybacks may contain symptoms but not resolve the underlying US funding problem. Thus, we remain cautious on bonds, with UST volatility posing a bigger cross-asset risk than higher yields alone.
"The resulting policy unpredictability is cyclically USD-negative (and gold-positive), but we remain medium-term neutral-to-positive on dollar given the absence of credible reserve-currency challengers and continued US growth and capital market dominance. Equities, meanwhile, may prove more resilient to higher yields than conventional playbooks suggest: strong balance sheets, robust earnings, and growing weight of globally diversified, cash-generative US Tech indicate growth could matter more than absolute level of rates," Emkay said.