On September 14th, the US 10-year Treasury yield, known as the "global anchor of asset pricing," briefly surged to 5.012% during trading before retreating to 4.960%. However, in early Asian trading on September 15th, the 10-year Treasury yield once again broke through the critical 5% level.

After reclaiming the vital 5% threshold, the 10-year Treasury yield is more likely to enter a phase of high-level volatility and accelerating divergence in asset performance. Especially before an energy shock and the US's persistently large fiscal deficit expansion show clear signs of easing, the conditions for a swift replication of the late-2023 yield decline are insufficient. The US fiscal deficit continues to widen, and interest payments have repeatedly hit record highs—in the first 11 months of this fiscal year, the Treasury's cumulative net interest payments historically exceeded the $1 trillion mark for the first time. Combined with intensifying geopolitical conflicts in the Middle East pushing up oil prices and aligning with Fed rate hike expectations, this has finally driven the US 10-year Treasury yield to the 5% threshold.

Amidst the escalating market debate between a "2023-style brief peak followed by a smooth decline" and a "2000s-style financial crisis" for the 10-year Treasury yield, investors truly need to judge whether the Fed will initiate a new rate hike cycle and how long high rates will persist. They must also assess whether companies and financial institutions can withstand rising financing costs with their cash flows, and whether the US Treasury can continue its "borrow new to repay old" strategy under sustained high-rate pressure. The evolution investors should be most wary of is the persistently elevated yields on 10-year and longer-term Treasuries, gradually transforming valuation pressure in global stock markets into real debt repayment pressure; the September 16th FOMC decision will be a critical juncture to test this trend.

For the trajectory of the global stock market bull run since 2023, driven by the AI investment wave, a persistently high and climbing 10-year Treasury yield stands as the market's "strongest foe." The 10-year Treasury is dubbed the "global pricing anchor" because of its benchmark role in the dollar funding system and medium-to-long-term cash flow valuation. The US Treasury market is vast and highly liquid, and the dollar is widely used in international financing and reserves, making its yield changes cross-market influential—US corporate bonds are typically priced off comparable-maturity Treasury yields plus a credit spread, mortgage rates are influenced by Treasury and MBS pricing, and stock and real estate valuations are highly sensitive to the discount rate applied to future cash flows. When this benchmark rises without a concurrent improvement in earnings or rent expectations, asset prices face downward pressure.

These effects also transmit overseas through dollar funding costs, currency hedging, and cross-border capital flows; the specific impact on any asset class depends on its currency, maturity, and credit risk profile. From a theoretical standpoint, the 10-year Treasury yield represents the risk-free rate component 'r' in the denominator of the DCF valuation model, a key metric for stock valuation. When other indicators—especially cash flow expectations in the numerator—remain unchanged, such as during earnings season when the numerator lacks positive catalysts and is in a vacuum, a higher denominator or one operating at historically extreme highs above 5% can lead to valuation collapses for risk assets like AI-linked tech stocks trading at lofty valuations, high-yield corporate bonds, and cryptocurrencies.

Can a Fed return to rate hikes stabilize 10-year and longer-dated Treasury yields? Behind the 25 basis point rate hike expectation lies a "credibility battle" for the Fed. The current macro mix supports the Fed maintaining vigilance while also retaining room for limited adjustments. US August CPI rose 3.4% year-over-year, and core CPI rose 2.4% year-over-year, but core CPI accelerated to 0.3% month-over-month from 0.2% in July; nonfarm payrolls increased by 162,000 in the same period, with the unemployment rate holding at 4.1%. This suggests inflation improvement remains uneven and employment does not yet show clear pressure forcing an immediate policy pivot to easing. The follow-through impact of the energy shock will depend on whether it spreads through transportation costs, corporate pricing, and wage negotiations. Rate hikes can restrain demand and stabilize inflation expectations, but increasing oil supply and alleviating shipping disruptions require other, more complex conditions—namely geopolitical factors that are far more intricate than monetary or fiscal policy. This combination of supply-driven high inflation expectations and resilient employment leaves long-end Treasury yields without a sufficiently clear catalyst for a sustained and rapid decline.

The information from this Fed FOMC meeting most likely to shift market direction is the policy path following a rate hike. Pre-meeting market snapshots show fed funds futures implying roughly an 88% probability of a 25 basis point hike; if this move materializes, the target range would rise from 3.50%-3.75% to 3.75%-4.00%. The high implied probability reduces the element of surprise in the single hike itself but does not eliminate the risk of consecutive tightening. In the view of some veteran Wall Street analysts, a combination more conducive to market digestion would be a modest hike paired with a clear data-dependent stance, allowing investors to interpret it as a limited and measured policy adjustment to guard against inflation relapse. If the dot plot and press conference further signal higher and longer policy rates, corporate financing and equity valuations would need to re-adapt to an upward shift in the entire rate path, creating far more pressure than a single 25 basis point adjustment.

Rate hikes and falling long-end yields can occur simultaneously, with policy credibility being the key. Long-term Treasury yields are roughly composed of the average expected future short-term nominal rates plus a term premium; the latter reflects the additional risk compensation required for holding long-dated bonds. If a rate hike boosts market confidence in inflation control, reducing concerns about medium-to-long-term inflation, subsequent hikes, and rate volatility, the required return on long bonds may fall. Conversely, if policy communications clearly diverge from economic data and raise investor doubts about Fed independence, long-term funding costs could rise even if the short-term policy rate remains unchanged. Fed Chair nominee Kevin Warsh, nominated by Trump, needs to demonstrate that decisions align with inflation and employment goals. Whether limited tightening can translate into more stable long-term expectations will determine whether this hike has a market-stabilizing effect.

"I keep asking myself: 'What exactly can serve as a catalyst to push yields down?' Other than a traditional recession, it's hard to find anything else," said Greg Peters, co-chief investment officer at PGIM Credit, in an interview. "The conditions for keeping yields elevated or even pushing them higher are fully in place." Zach Griffiths, head of investment grade and macro strategy at research firm CreditSights, noted, "Many underlying factors collectively determine that rising rates are currently the path of least resistance." He added that the 10-year Treasury yield could potentially push toward 5.5%. Strategists at TD Securities, led by Gennadiy Goldberg, said that given the market has already priced in Fed rate hike expectations significantly, yields are unlikely to spiral uncontrollably higher because of the hike. However, unless the economy shows signs of deterioration, long-dated yields should generally remain elevated through 2027. Mike Bell, market strategy head at RBC BlueBay Asset Management, also believes that if oil prices continue climbing, the bond selloff could become "more severe." "It's still too early to call a peak in bond yields."

For stock bulls, the relatively most perfect scenario—the 2023-style "10-year Treasury yield peaking smoothly and then falling"—requires fundamental and policy expectations to cooperate in tandem. Back then, the 10-year yield approached 5% in October before falling below 4% by year-end, underpinned by a reassessment of inflation and monetary policy prospects. Now, the market is discussing whether rate hikes are needed again, a distinctly different policy environment. To replay the scenario of bonds rallying with risk assets benefiting simultaneously, one would need cooling energy prices, improving core inflation trends, and resilience in employment and corporate earnings. A single-day dip after touching 5% only shows that price level attracted buyers; it's insufficient to confirm a sustained downtrend. If yields eventually fall due to a recession, deterioration in corporate earnings and credit quality could offset the benefit of a lower discount rate in DCF valuations, and stock-bond performance would differ from late 2023.

From massive Treasury debt to the AI infrastructure financing boom: cash flow determines who can withstand high rates. Fiscal financing pressures may make this period of high rates last longer than markets hope. With total US federal debt surpassing $40 trillion, the key variables affecting yields are new deficits, refinancing volumes of maturing debt, the maturity structure of bond issuance, and the price at which investors are willing to absorb long-dated Treasuries. As low-coupon debt matures and is refinanced at higher rates, the government's interest burden will gradually increase; if the fiscal revenue-expenditure gap remains large, markets will need to continuously absorb new bond supply. Treasury buybacks can improve liquidity in off-the-run bonds and smooth cash management and issuance schedules, but their effect is tied to accompanying financing arrangements and cannot substitute for fiscal adjustments. Even if the Fed stabilizes inflation expectations with a single hike, long-term bond supply and the term premium investors demand may still limit the extent of yield declines.

The flip side of the "2023-style smooth peak and decline" narrative—the "2000s-style equity bear market crisis accompanied by persistently rising 10-year Treasury yields"—offers the most valuable lessons in how losses amplify through leverage and financing chains. Back then, falling real estate prices and mortgage losses gradually evolved into systemic stress through securitized products, financial institution leverage, and reliance on short-term funding. The transmission path to watch this time is higher interest expenses eroding borrower cash flows, tighter refinancing conditions, declining collateral asset values, triggering margin calls and forced asset sales. To gauge whether risk is escalating, one should simultaneously monitor credit spreads, debt rollover conditions, and short-term funding markets. A 5% Treasury yield alone is insufficient to determine a crisis; interest rate pressure only translates into credit events when cash flow gaps cannot be bridged through normal financing. Should safe-haven demand intensify, 10-year and longer-dated Treasury yields could even fall while risk assets suffer larger losses.

For the 10-year and longer-end yield curve, a more critical structural force comes from the "fiscal deficit + AI debt issuance" competition for the global long-duration bond funding pool: US Treasury balances are approaching $40 trillion, with FY2026 deficit expectations around $1.9-$2.1 trillion; simultaneously, AI-related debt has already approached 15% of this year's investment-grade bond issuance. Goldman Sachs notes that hyperscale cloud providers like Google parent Alphabet and Amazon have issued roughly $194 billion in bonds this year and expects their direct financing supply could reach approximately $250 billion in 2026. More broadly, AI Hyperscalers including Alphabet, Amazon, and Meta have issued nearly $220 billion in bonds since the start of this year, more than double the $108 billion issued in all of 2025—what appears to be "a record-high for the period or a record-breaking issuance pace" compared to available data.

Unprecedented AI investment in computing infrastructure may extend economic resilience but also amplify financing disparities among companies. The Fed's July statement still described capital investment and productivity growth as strong, providing some support for the economy's ability to withstand higher rates. Cash-rich large tech companies may continue advancing strategically important computing buildouts, sustaining demand for chips, power facilities, and data centers; projects reliant on borrowing, finance leases, and continuous fundraising are more vulnerable to interest expenses and refinancing constraints. If AI capital expenditure remains robust while productivity improvements have yet to fully translate into lower costs, investment demand may temporarily delay high rates from restraining aggregate demand. From this, one can infer that the AI computing supply chain is more likely to see differentiation driven by financing capacity and receivables quality—actual order growth, capital expenditure, and real free cash flow must be scrutinized and tested over the long term. This logic around long-term AI revenue trajectories and cash flow stability is also the core reason why US cloud giants outperformed the Philadelphia Semiconductor Index on Monday.

Despite the infrastructure boom, some of the core hyperscalers moved against the grain on Monday: Google parent Alphabet rose over 3%, Microsoft gained 1.97%, and Meta was up around 2.7%. Amazon closed slightly down 1.26%, but its resilience far outpaced the chip stocks, owing to its massive cash flows and ability to continuously generate ROIC from existing facilities. A more useful framework for the coming weeks is to observe Treasury yields, credit spreads, and earnings expectations together. If yields decline alongside easing inflation, while credit spreads remain stable and earnings expectations hold up, the "2023-style peak" narrative gains stronger support, improving conditions for long-duration bonds and quality growth assets; if real rates and term premia remain elevated, allocation advantages tilt toward assets with ample cash flow, low leverage, and minimal near-term refinancing needs; if yields fall but credit spreads widen noticeably, one should prioritize identifying recession and financing stress. More likely to emerge first is asset screening under high rates, followed later by confirmation of the macro cyclical direction. Whoever can convert growth into cash flow available for interest payments, debt repayment, and reinvestment is better positioned to withstand the upward move in the global pricing anchor.