10-Year Treasury Yield Hits Three-Year High

Currently, market experts are forecasting that interest rates could rise to 5%. This sharp increase in Treasury yields is placing significant pressure on the stock market.

While the Treasury's long-term bond buyback announcement is expected tomorrow, the market anticipates purchases of around $4 billion to $6 billion per session. However, the amount the Treasury Secretary is currently buying back is significantly lower compared to the size of corporate bonds issued this week. Due to structural limitations, such as buying long-term bonds with short-term bond issuance, the effectiveness of the Treasury's policy is being questioned.

Recent Houthi attacks on Saudi oil facilities have led to increased oil price volatility. If refining facilities cease operation, the amount of crude oil purchased decreases, acting as a downward factor for crude oil demand. Simultaneously, the production of fuels like gasoline and diesel also decreases, negatively impacting the supply of fuel for consumers. These complex factors make it difficult to predict the direction of oil prices, exacerbating market confusion.

This does not mean that shares are being bought immediately today or that cash is being injected into Qualcomm. For shareholders, this right to purchase shares can have both positive and negative effects on stock prices, requiring consideration of both directions.

This method of rights offering could dilute the value of existing shareholders' stakes. Therefore, while Amazon's investment could be a positive factor for Qualcomm's stock price, the risk of dilution must also be considered.

Bloomberg analyzed that rising bond yields led to a concentration of funds in the semiconductor sector. However, the host argued that the strength of the semiconductor memory and AI sectors led to an increase in corporate bond issuance, which in turn caused an overall rise in bond yields. In other words, he suggested that the strong performance of the semiconductor stock market was the cause of rising bond yields.

The possibility of oil prices reaching $100 cannot be ruled out. The release of strategic petroleum reserves is already an exhausted card, with concerns about insufficient additional supply capacity. The moment strategic reserves are released, a reliable means of supply control disappears from the market, making further supply expansion difficult. This expectation of reduced supply is anticipated to continue upward pressure on oil prices.

If the market begins to reflect rate hikes, the 10-year yield is likely to rise further. With current rates surpassing previous highs, there is concern that the market has not yet sufficiently priced in rate increases.

Some argue that the Fed's interest rate hikes could lead to a decline in long-term rates due to expectations of inflation suppression. However, Yu Sa-nam countered this, personally arguing that if the Fed raises rates, bond yields are bound to rise. This is based on the logic that an increase in banks' borrowing costs leads to higher market rates.

In such a scenario, bond yields could surge. Some warning signs from companies, including AI data centers, support these concerns.

This is understood to be for the purpose of immediately utilizing gold as collateral and converting it into cash in emergencies. Such a move is connected to the growing concern over US dollar weakness and the resulting preference for physical gold.

Quantum computing related companies like Pascal currently have little to no revenue. This leads to criticism that these stocks lack fundamentals and tend to force long-term investments. Additionally, the quantum computing market is analyzed to have a high investment risk due to the possibility of a winner-takes-all structure.

After assessing the soundness of big tech companies and private equity funds, it was stated that a gradual, rather than sudden, decline is expected, instead of a sharp crash like the Lehman Brothers crisis. This perspective lowers concerns about a potential market collapse.

The estimated corporate bond issuance for this week is around $40 billion to $50 billion. In contrast, the anticipated purchase figure is $4 billion. This indicates a low purchase ratio compared to the issuance volume.

The US Treasury's bond purchase volume is not large in absolute terms. However, the bonds the Treasury buys are those already issued and thinly traded, which improves trading activity in the market. The Treasury's purchases act as a last resort but are not strong enough to curb rising long-term yields, according to the assessment.

If one borrows money at variable interest rates and invests in US stocks, the investor could incur losses if the value of the US dollar declines faster than US stocks rise. Additionally, if Korean interest rates increase, investors using variable-rate loans could face increased interest burdens, which could lead to forced selling of US stocks and margin call risks.