30-year Treasury climbs to highest level since 2002

Stocks fell on Tuesday as the 30-year Treasury yield ( ^TYX ) climbed to its highest level since 2002.

The long-dated bond yield, which typically reacts to geopolitical and macro events, touched 5.61%. The 10-year Treasury yield ( ^TNX ), used as a benchmark for mortgage rates and other borrowing costs, rose to 5.29%.

While the stock market hasn't fallen off a cliff, Wall Street is watching for the 10-year's critical threshold.

"Historical data show that valuations start compressing after 5.5%, and everyone from investors to corporations to consumers would have to redo the math on their investments," Fundstrat's economic strategist Hardika Singh noted on Tuesday.

US Treasury bond prices, which move inversely with yields, are on track for their worst September since 2023. History suggests next month may not be much better as oil prices remain elevated and investors price in more rate hikes from the Federal Reserve this year.

Over the past decade, Treasurys have posted a median loss of 0.9% in September and 0.7% in October, according to Bloomberg data. That seasonal pattern is now colliding with a market already under pressure.

Rising oil prices have been a major headwind, fueling inflation expectations and raising the odds of more Federal Reserve rate hikes. Traders currently see a 70% chance of an increase at the Fed's next meeting in October, according to CME Group's FedWatch.

Yardeni Research's Ed Yardeni pointed out that the rise in yields may be due to an unwinding of the yen carry trade, in which investors borrow cheaply in Japan and invest in higher-yielding assets abroad.

"This trade allowed many governments run budget deficits without putting upward pressure on their bond yields," Yardeni wrote in a note on Monday evening. "Now, the chickens have come home to roost."

Ines Ferre is a Senior Business Reporter for Yahoo Finance covering the US stock market, publicly traded companies, and commodities.