U.S. stock market futures remained unchanged due to the impact of rising U.S. Treasury yields on market sentiment. Updated on May 23, 2025.
On May 23, 2025, U.S. stock market futures were nearly flat as investors absorbed the surge in long-term U.S. Treasury yields. The 30-year Treasury yield reached 5.16%, and the 10-year yield surpassed 4.6%, marking their highest levels since October 2023. This increase is linked to the U.S. Congress passing tax reform and military spending bills under the Trump administration, heightening concerns about the expanding fiscal deficit, resulting in falling bond prices, rising yields, and a dampening effect on stock market performance.
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05/23 01:47
U.S. stock market futures remained unchanged due to the impact of rising U.S. Treasury yields on market sentiment. Updated on May 23, 2025.
On May 23, 2025, U.S. stock market futures were nearly flat as investors absorbed the surge in long-term U.S. Treasury yields. The 30-year Treasury yield reached 5.16%, and the 10-year yield surpassed 4.6%, marking their highest levels since October 2023. This increase is linked to the U.S. Congress passing tax reform and military spending bills under the Trump administration, heightening concerns about the expanding fiscal deficit, resulting in falling bond prices, rising yields, and a dampening effect on stock market performance.
Stock Futures Remain Flat, Market Sentiment Wary
According to CNBC, as of Thursday evening, the changes in futures for the three major U.S. stock indices were limited. Dow Jones Industrial Average futures rose by 14 points, about 0.03%; S&P 500 futures inched up 0.03%; while Nasdaq 100 futures slightly declined. This reflects a market in a wait-and-see phase after several days of decline, as investors assess the potential impact of the U.S. Congress passing a tax reform bill on debt and the economy.
In Thursday's regular trading, the S&P 500 and Dow Jones Industrial Average closed nearly flat, marking the third consecutive day of decline. The Nasdaq Composite Index, however, bucked the trend by rising about 0.3%. Overall, the three major indices have shown a downward trend this week, with the S&P 500 down nearly 2%, the Dow down about 1.9%, and the Nasdaq down about 1.5%.
U.S. Treasury Yields Soar, Market Focus Shifts to Fiscal Risks
The rapid rise in long-term U.S. Treasury yields has become the main focus of the market this week. According to Yahoo Finance and CNBC, the 30-year Treasury yield briefly hit 5.161% during Thursday's session, the highest level since October 2023. The 10-year yield also rose to 4.62%, while the 20-year Treasury yield reached 5.047% in an auction earlier this week, a new high since the product was introduced in 2020.
The rise in yields is closely related to the U.S. House of Representatives passing the Trump administration's tax reform and military spending bill. The bill includes tax cuts and increased military spending, which is expected to further expand the U.S. federal deficit. According to United Daily News, the bill could increase U.S. debt by $3 to $5 trillion. The Congressional Budget Office (CBO) estimates the cost of the bill at nearly $4 trillion.
The market reacted strongly to this. The Wall Street Journal pointed out that the rise in long-term bond yields reflects investors' concerns about increased future bond supply and inflationary pressures. Since yields and bond prices have an inverse relationship, falling bond prices mean investors demand higher returns to take on risk.
Sluggish Demand in Bond Market, Disappointing Auction Results
The U.S. Treasury auctioned $16 billion of 20-year bonds this week, with a yield of 5.047%, significantly higher than last month's 4.810%. According to Economic Daily News, participation from indirect bidders such as foreign central banks decreased, with the bid-to-cover ratio dropping from 2.63 to 2.46. Primary dealers were forced to take on 16.9% of the auction amount, higher than the average of 15.1%, indicating weakened demand for long-term U.S. Treasuries.
Ajay Misra, a fund manager at JPMorgan Asset Management, noted that the bond market is sending a warning to policymakers that the fiscal deficit issue demands attention. This sentiment has also spread to the stock and credit markets, with investors' appetite for risk assets clearly declining.
Credit Rating Downgrade and Bill Passage Heighten Market Pressure
Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1 last week, citing "large annual fiscal deficits and rising interest costs." This rating adjustment further exacerbated market concerns about the sustainability of U.S. finances.
According to Aastocks, the 30-year Treasury yield stabilized at 5.089% early Thursday, while the 10-year yield slightly fell to 4.587%, but overall levels are still elevated. The 2-year yield also stayed around 4.005%. These figures indicate that although short-term rates have slightly retreated, long-term rates remain under pressure.
Global Bond Markets Simultaneously Under Pressure, Investor Risk Appetite Wanes
Not only in the U.S., but long-term government bond yields in major global economies have also risen simultaneously. According to United Daily News, the UK's 30-year bond yield rose to its highest point since 1997, and Japan's long-term bond yield also hit a historical high. This reflects widespread investor concerns about government debt expansion globally and indicates a declining willingness to lend long-term funds.
EBC Financial News pointed out that changes in the 20-year U.S. Treasury yield have a substantial impact on both businesses and households. Rising corporate borrowing costs may limit expansion and profitability, while higher mortgage rates directly increase financial pressure on households.
Market Sentiment Becomes Cautious, Investors Await More Economic Data
Amid rising yields and increased fiscal risks, market sentiment has clearly turned conservative. Investors are closely watching upcoming economic data, including building permits and new home sales, to further assess economic fundamentals.
Additionally, according to Yahoo Finance, although yields slightly retreated later on Thursday, overall levels are still elevated, putting pressure on the stock market. S&P 500 futures fell 0.4%, poised to close lower for the third consecutive day.
