[Anchor]

Government bond yields in major developed nations, including the United States, the United Kingdom, and France, are surging to levels not seen in decades. While this typically acts as bad news for the stock market, the recent trend in equities tells a different story.

Reporter Min Gyeongho explores the reasons behind the stock market's resilience.

[Reporter]

Yesterday, the yield on 10-year U.S. Treasury bonds hit 5.36% in the afternoon.

This marks the highest level in 24 years and 6 months.

It means investors can earn a return of over 5% annually on bonds backed by the U.S. government.

[Ryu Dong-ki / Mirae Asset Securities, Yeouido WM Team : Quite a few people are inquiring about what kind of yields they can get. Even VIP clients are visiting in person and asking us to compare interest rates.]

In fact, domestic retail investors purchased more than 2.4 trillion won worth of U.S. bonds last month.

The rise in government bond yields is a global phenomenon.

Driven by prolonged inflation due to the Middle East conflict and companies issuing high-interest bonds to fund artificial intelligence investments, government bond yields are climbing alongside them.

However, concerns have been raised that such spikes in yields would reduce the demand for riskier asset investments like stocks.

Between 2022, as the 10-year U.S. Treasury yield rose from the mid-1% range to 4.3%, the S&P 500 index plummeted from 4,700 to 3,500.

The atmosphere is somewhat different this time.

The U.S. Treasury yield, which was around 4.3% in late June, has fluctuated above 5.3% over the span of about three months, yet the S&P 500 index has actually risen by 2%.

Analysts point out that corporate earnings forecasts are serving as the primary pillar of support above all else.

Looking at the U.S. Composite PMI, which indicates how active U.S. businesses are:

While it fell below 50, signaling economic contraction amid rate hikes in 2022, this time it has risen for four consecutive months, reaching 58.4 last month—its highest level in 5 years.

Earnings-per-share forecasts for S&P 500 companies for the third quarter of this year have also risen by 1.3% compared to expectations from three months ago.

The prevailing logic is that even though U.S. Treasury yields have climbed, investors have no reason to abandon the stock market if they can earn even higher returns by investing in corporations.

That said, for the same reason, if corporate earnings forecasts falter, this logic could collapse all at once, potentially intensifying the shock to the market.

Experts advise that market participants must first closely monitor whether the U.S. FOMC later this month will send stronger tightening signals than anticipated by the market.

(Photo: Choi Ho-jun, Video Editing: Park Ji-in)