[New York Stock Market] All Major Indexes Fall as U.S. Treasury Yields Surge... 30-Year Yield Tops 5% Again

Republicans to Push Trump Tax Cut Bill
Treasury Yields Surge on Fiscal Deficit Worries
30-Year Yield Tops 5%, 10-Year Exceeds 4.5%
U.S. Treasury Auction Sees Weak Demand
Target Drops on Lower Sales Outlook Amid 'Tariff Impact'

All three major U.S. stock indexes closed lower on May 21 (local time) in New York. As Republican leaders pushed for the passage of a tax cut plan that includes key campaign promises of former President Donald Trump, concerns over worsening fiscal deficits drove up Treasury yields and dampened investor sentiment. The yield on the 10-year U.S. Treasury note once again surpassed 4.5%, while the 30-year yield climbed above 5%.

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On the New York Stock Exchange that day, the blue-chip Dow Jones Industrial Average closed at 41,860.44, down 816.8 points (1.91%) from the previous session. The large-cap S&P 500 index dropped 95.85 points (1.61%) to 5,844.61, while the tech-heavy Nasdaq index fell 270.07 points (0.38%) to 18,872.64.

U.S. Treasury yields surged, particularly in long-term maturities, fueling a wave of stock selling. The yield on the 10-year Treasury note, a global benchmark, rose 11 basis points (1bp=0.01 percentage point) from the previous session to 4.59%. The 30-year Treasury yield also jumped 11 basis points to 5.08%, marking its highest level since late October 2023.

As former President Trump pressured the Republican Party to pass a "mega bill" containing large-scale tax cuts expected to further worsen the fiscal deficit, a surge in Treasury yields ensued. The previous day, Trump warned Republican lawmakers that those who opposed the bill would be "ousted" in the next election. According to major institutions such as the Congressional Budget Office (CBO) and Moody's, if the bill passes, tax revenues are expected to decrease by at least $3 trillion. After Republican leaders resolved internal disagreements and decided to bring the bill to a House vote that night, concerns over a worsening fiscal deficit intensified.

Weak demand at a U.S. Treasury auction further accelerated the rise in yields. The U.S. Treasury Department held an auction for $16 billion in 20-year bonds that day. Due to sluggish investor demand, the auction yield reached 5.047%, the highest since 2020, and 46 basis points higher than the six-month average of 4.613%.

After global credit rating agency Moody's downgraded the U.S. sovereign credit rating, citing federal debt issues, Trump's push for tax cuts has amplified investor concerns over a deteriorating fiscal deficit. The market now expects U.S. Treasury yields to rise even further. If the government runs a larger deficit, it will need to issue more Treasuries to cover the gap, but if there are not enough investors to absorb the increased supply, higher yields will be required to attract buyers.

The sharp rise in U.S. Treasury yields is a significant burden on the global economy. The 10-year U.S. Treasury yield serves as a benchmark for all borrowing costs, ranging from mortgage loans to corporate lending.

Lindsey Rosner, Head of Multi-Sector Fixed Income at Goldman Sachs Asset Management, commented on bond yields, saying, "The trend from here is clearly higher," and added, "The core issue is skepticism over fiscal matters. This is not just a U.S. problem, but a global one."

Sam Stovall, Chief Investment Strategist at CFRA Research, stated, "From a fiscal perspective, the key questions now are what this tax law will look like, and whether simply slowing the pace of debt growth will undermine fiscal tightening in a potential second Trump term." He pointed out, "Investors are concerned that we are taking no action to slow inflation or reduce debt, which is why the 10-year Treasury yield is surging."

Additionally, ongoing uncertainty over tariffs and persistent concerns about stagflation (rising prices amid economic stagnation) are also contributing to instability in the stock market.

By sector, major U.S. retailer Target fell 5.21%. The company lowered its annual sales outlook after first-quarter sales missed expectations, and due to consumer backlash over tariff uncertainty and the discontinuation of its DEI (Diversity, Equity, and Inclusion) policies. Walmart and Home Depot dropped 1.4% and 1.65%, respectively. Technology stocks were also weak, with Nvidia down 1.92%, Apple down 2.31%, and Tesla down 2.68%.