'We would argue that the equity market is not prepared for a swift move higher in the long end,' says one technical strategist

Treasury yields are elevated, and equity investors may not be ready for what comes next.

A global bond-market rout is pressuring stocks on Tuesday, sending major U.S. indexes lower for a third consecutive session.

Equity investors might not be ready for what comes next, according to one Wall Street strategist.

The yield on the 30-year Treasury bond BX:TMUBMUSD30Y touched its highest level since June 2007 on Tuesday, before easing back slightly. Based on the technical trajectory, the selloff could worsen in short order, said Jonathan Krinsky, a top technical strategist at BTIG, in a report shared with MarketWatch.

Bonds have been struggling for years, ever since the Federal Reserve started raising interest rates in the spring of 2022. But since the start of August, the yield on the 30-year bond - the longest-dated bond issued by the Treasury - has broken out of a three-year range. That is a sign that the selloff isn't finished. Bond yields move inversely to prices, rising as prices fall since higher yields are needed to attract buyers.

"We would argue that the equity market is not prepared for a swift move higher in the long end - say toward 6% for the 30-year," Krinsky told MarketWatch on Tuesday.

Higher bond yields can be bad for stocks for two reasons. They make bonds look relatively more attractive for investors, encouraging them to move money out of stocks and into bonds. Higher yields also boost the discount rates used in analysts' equity-valuation models, which causes estimates of a stock's fair value to decline. That being said, rising yields don't guarantee that stocks will suffer. Indeed, stocks have been climbing since the end of 2022, even as yields have generally trended higher.

But a few episodes of stock-market weakness during that time have coincided with a sharp move higher in yields, most notably the S&P 500 correction in the fall of 2023.

Beyond the absolute level of yields, it is the rate at which they have trended higher that can create problems for stocks, Krinsky said.

There is historical precedent for a rapid rise in long-end rates signaling a top for stocks, according to the X account Oddstats.

The only time in history in which the 30-year yield went from trading in the 4% range to the 6% range within six months was June 1999, Oddstats said. Less than four months later, the S&P 500 was in correction territory.

Nine months later, the index tallied its last record high before falling into a yearslong bear market as the dot-com bubble fizzled.

The yield on the 30-year Treasury bond traded below 4.6% as recently as March, according to FactSet data.

To be sure, bond-market pain hasn't been limited to the 30-year. The yield on the 10-year Treasury note BX:TMUBMUSD10Y - a widely used benchmark rate for trillions of dollars in loans - hit a session high Tuesday of 4.747% earlier, the highest level since January 2025, Dow Jones Market Data showed.

U.S. equity indexes were lower in recent trade on Tuesday, even as bond yields ticked slightly lower. The S&P 500 SPX was off by 0.6%, at 7,695, while the Nasdaq composite COMP was down 1.4%, at 26,269. The Dow Jones Industrial Average DJIA was only marginally lower.

-Joseph Adinolfi