10-Year Treasury Yield Hits 5.34% for First Time Since 2002, Stoking Fear Over AI Trade and Broader Markets

The 10-year Treasury yield climbed as high as 5.34%, a level not seen since 2002, intensifying a bond selloff that is rippling through equity markets and raising fresh questions about how long stocks can hold up. While the S&P 500 remains within roughly 2% of a record high, the damage beneath the surface is already visible, with small-cap stocks, banks and utilities bearing the brunt of rising rates.

Analysts at Pantheon Macro expect an upcoming jobs report to offer only temporary relief from the selloff in bonds, suggesting the pressure on fixed income is structural rather than transient. The firm's view implies yields could stay elevated even after any short-term pullback triggered by labor market data.

Among the sharpest concerns is what sustained high yields mean for the AI investment boom. Mikhail Zverev of Amati Global Investors warned that rising yields could spell trouble specifically for the AI trade, which has been a primary engine of the broader equity rally. The bond market's deterioration is also prompting investors to look for alternatives, as analysts note that U.S. and other developed-market government debt is losing its traditional safe-haven appeal.