U.S. 10-Year Treasury Yield Breaks 4.7%, Signals Shift to Defensive and Financial Stocks

According to KB Securities analyst Kim Il-hyuk, the U.S. 10-year Treasury yield has risen to 4.7% recently from 4.4% a month ago, amid geopolitical tensions and fiscal concerns. The TIPS (inflation-protected Treasury) yield climbed to 2.428%, marking its highest level since October 2023. Futures markets are pricing in a 78.6% probability of a Federal Reserve rate increase in September.

Analysts recommend reducing exposure to interest-rate-sensitive growth stocks, particularly AI-related equities, and shifting toward defensive sectors such as consumer staples and healthcare, as well as financial stocks. The higher borrowing costs pressure companies with heavy capital requirements, as illustrated by Amazon's $25 billion bond offering falling short of expectations and Oracle's credit default swap premium rising to a record 210.8 basis points.