Investment Bank Piper Sandler Says Stocks Could See Turbulence If Bond Yields Rise: 'I Don't Think Equity Markets Are Going To Be Real Happy'

Amid anticipations for the upcoming CPI report, Craig Johnson of Piper Sandler predicts a rough patch for equity markets if 10-year bond yields hit 4.5%.

What Happened: During CNBC’s “Last Call” on Tuesday, Johnson voiced concerns over the potential impact of rising 10-year bond yields on equity markets.

“If we start seeing 10-year bond yields work their way to 4.5%, I don’t think equity markets are going to be real happy,” he said.

Johnson’s comments come as investors brace for the latest Consumer Price Index (CPI) report.

“2.5 rate cuts is what’s priced in. That still may be too high,” he added.

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Why It Matters: The relationship between bond yields and equity markets is a critical one, as rising yields can signal increasing borrowing costs for companies, potentially dampening investor enthusiasm. Investor optimism has seen a slight decline with inflation data being a focal point. This sentiment was reflected in the CNN Money Fear and Greed index, which showed a dip yet remained in the “Greed” zone as of Tuesday.

Moreover, bond yields have been a hot topic which highlighted the unpredictability of the bond market. The market’s anticipation of Federal Reserve rate cuts has been fluctuating with each new economic indicator, keeping yields above 4% despite expectations of a downward trend.

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