US Treasury yields break 6%: the $110 billion sell-off wave will hit stocks hard

According to Woofun AI, senior strategist Harry Bassman (Harry Bassman) issued a core warning that if the yield on 20-year US Treasury bonds hits the 6% warning line, the market mechanism will cause severe shocks.

According to the report released on October 13, the current yield on 20-year bonds is about 5.68%, which is only 0.32 percentage points away from this tipping point. Data compiled by Woofun AI shows that in treasury bond futures contracts worth about $200 billion, sellers tend to deliver bonds with longer maturities to reduce costs, but this will cause the bond value to drop further due to rising interest rates. Fund managers may increase selling or hedging efforts to control risk exposure. Bassman estimates that this shift in delivery method is equivalent to auctioning $110 billion of 20-year bonds within four months. Although it is not an actual sales amount, it reflects huge potential market pressure and may create a “nightmare situation.”

This pressure will directly spread to the stock and cryptocurrency markets. Higher treasury bond yields drive up corporate borrowing costs, and are particularly bad for technology stocks with high valuations. The Bank of America (BAC.US) survey indicates that when the 10-year Treasury yield reaches 5.9%, capital will tend to flow to bonds rather than stocks, while the yield for this type was only 5.22% on Tuesday.

Meanwhile, Bitcoin traded around $83,014 on Tuesday. Bitunix has attributed the recent weakness in the crypto market to rising US borrowing costs, and rising yields are attracting investors away from high-risk assets.

Although this tipping point will not necessarily cause the market to collapse, a rapid rise in yield may have an impact before it hits the value. Bassman stressed that Washington's fiscal deficit of up to 6.2% is the root cause. This is not simply an inflation issue, but a serious “trust” issue.