Soaring Bond Yields Are Starting to Knock Down the Stock Market’s Rally

Published: May 21, 2025 by Omor IE

Key Points

The stock market has ended its 6-day win streak, and could extend losses today.
Treasury yields are going up, and this is making borrowing more costly.
A new report by the CNN and cooling macros is also driving fear.
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The S&P 500 lost its 6-day winning streak yesterday due to bond yields climbing. Today, the market has opened red again due to soaring Treasury yields once more. The 6-month Treasury bill is up just over 1 basis point, the 1-year is up 2 basis points, but the biggest change has been with longer-term Treasuries.

The 10-year Treasury is up nearly 5 basis points, and the same is the case with the 20-year and the 30-year bonds, both of which now yield over 5%. If yields continue to rise, this would make it even harder for the government to borrow money. In turn, the fear and the loss of confidence have spilled over into the stock market, especially as President Donald Trump warned about massive tax increases if his tax bill did not pass.

The U.S. was also hit with a credit rating downgrade by Moody’s recently, and the downgrade came precisely due to the government’s inability to control spending and keep debt under control.

Here’s a market update as of 10:50 AM (ET) today.

The S&P 500 is down 35.2 points, or 0.59%.
The Nasdaq Composite is down 43.77 points, or 0.23%.
The Dow Jones Industrial Average is down 416.51 points, or 0.98%.

Investors Fear a Plateau

Foreign bond yields are also going up, and investors are pessimistic about economic data. EIA Crude Oil Inventories came in at 1.328 million vs. the -1.1 million forecast. This is quite bearish, and the oil weakness could spill into the broader market.

Moreover, the U.K. saw an uptick in inflation. CPI came in at 3.5% vs. the 3.3% forecast, and the finance minister said he was “disappointed” with the figures. Considering significant tariffs are still in place and no new major deals have been signed recently, U.S. inflation may also tick up.

Geopolitics is also causing bearishness, as CNN reported, “New intelligence suggests Israel is preparing possible strike on Iranian nuclear facilities, US officials say”.

All of this could lead to a plateau in the stock market, especially if macro figures in the coming days get worse.

Tax Deal

According to U.S. House Speaker Johnson, “We came to a $40,000 SALT deduction cap agreement.”

A floor vote on the tax bill will happen today, though Rep. Chip Roy said he would still be voting no on the tax bill.

The “One Big Beautiful Bill,” introduced by the House Committee on Ways and Means, will extend and modify provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, alongside new tax policies proposed by Trump.

Other Assets

Gold prices are up 0.6% to $3,305/oz.
Crude Oil Futures have gone up slightly due to CNN’s report, but are almost flat.
Natural Gas Futures have declined 1.23%.
Bitcoin is up 0.9% to $107,778. It is less than $2,000 shy of reaching a new all-time high.