Longer-dated U.S. Treasury yields are making investors uncomfortable. The yield on the 30-year Treasury bond climbed to 5.14% on Thursday, the highest since since 2023. The closely-watched yield is within reach of 5.18% — a level last seen in 2007, the year before the Global Financial Crisis . Yields at these levels have unnerved equity traders this week, curbing a six-week-long comeback rally off intraday lows touched in early April. The S & P 500 dropped more than 1% on Wednesday, while the Dow Jones Industrial Average lost more than 800 points, or 1.9%. The main culprit for this latest spike in yields is concern over a ballooning U.S. deficit. Moody's last Friday cut its rating on U.S. credit, citing rising deficits. Adding fuel to those concerns is President Donald Trump's tax bill. US30Y 5Y mountain US 30-yr The measure passed the House of Representatives late Thursday and could increase the country's debt at a time when investors and consumers are already on edge over the amount of U.S. debt outstanding, the cost of servicing the debt and rising prices due to tariffs. "Not shockingly, the long-term U.S. fiscal situation is on an unsustainable path with spending levels YTD surprising to the upside again, with only 2020/2021 trends likely to be worse when the U.S. reaches its September fiscal year-end," Wolfe Research strategist Chris Senyek wrote. "Our sense is bond vigilantes are likely to start 'pushing back' on this unsustainable long-term outlook encapsulated in the tax bill working its way through Congress by sending long-term yields higher," he added. Yields are already at levels that make it hard for stocks to make further progress ( see Wednesday's Morning Playbook ) . But the speed at which rates move affects equity returns as well. Traders at JPMorgan highlighted 11 instances over the past year in which the 10-year Treasury note yield has moved 10 basis points or more in a single day (1 basis point equals 0.1 percentage point). In seven of those, the S & P 500 has closed lower on the day, averaging a 0.8% loss. Elsewhere Thursday morning on Wall Street, Bank of America downgraded Target to neutral from buy after the retailer posted disappointing first-quarter results. "Despite valuation near 10-year lows, we see increased uncertainty as top-line weakness continues and the timing of comp recovery gets pushed out, with softer sales driving higher markdowns and thus incremental margin pressure for TGT," analyst Robert Ohmes wrote in a note, adding that Target is now "well underperforming peers" such as Walmart .
