New Delhi [India], September 11 (ANI): A US 10-year Treasury yield of around 5 per cent should remain manageable for equities as long as economic growth and corporate earnings stay resilient, but a sustained rise towards 6-7 per cent could materially alter the market outlook, YES Securities said in a report.

The brokerage said apprehensions around a 5 per cent US 10-year yield were "overblown", as the recent rise in global bond yields increasingly reflected stronger nominal growth, a higher equilibrium real interest rate and synchronised monetary policy normalisation rather than deteriorating economic fundamentals or an imminent fiscal crisis.

"We therefore see 4.7%-5.2% as a tolerable higher-growth/higher-rate regime for equities; the thesis would change materially only if 10-year yields sustainably approach 6%-7%," the report said.

The US 10-year Treasury yield was around 4.8 per cent, while Germany's 10-year yield stood at 3.4 per cent and Japan's at 2.9 per cent, the report said. It noted that the US economy's neutral real interest rate, or r-star, had risen to around 1.65 per cent from approximately 1.36 per cent in early 2025.

According to the brokerage, markets were already pricing in two to three US Federal Reserve rate hikes over the next 12 months. It said these should be viewed as monetary normalisation rather than a destabilising tightening cycle.

"2-3 rate hikes could simply reinforce the Fed's inflation-fighting credibility and prevent expectations from becoming entrenched," the report said.

The report also pointed to resilient corporate earnings as a buffer against higher borrowing costs. One-year forward earnings growth for the S&P 500 remained in the mid-to-high 30 per cent range, while strong debt-servicing capacity among major technology companies provided additional resilience.

The report said the Magnificent 7 companies, excluding Apple, had an aggregate interest-coverage ratio of around 74 times, with Nvidia at about 503 times, Alphabet at 175 times, Meta at 71 times and Microsoft at 51 times.

It also said strong demand for US Treasuries indicated that markets were not currently pricing an imminent fiscal crisis. The 10-year and 30-year Treasury auction bid-to-cover ratios were around 2.53 times and 2.39 times, respectively.

For emerging markets, including India, YES Securities said a synchronised global rate cycle could reduce the risk of a destabilising dollar shock. The brokerage added that capital allocation could increasingly be driven by fundamentals and earnings rather than US rates alone.

The report said the risk profile would change materially if yields moved towards 6-7 per cent, potentially overwhelming earnings and nominal GDP growth. (ANI)