Societe Generale Sets 5.5% Treasury Yield as a Risk Threshold

Societe Generale sees a 5.5% yield on the 10-year U.S. Treasury as a threshold above which bond-market stress could threaten the economic cycle and trigger a systemic crash in risk assets.

The bank places a potential credit event near that level, where it says yields could also break the cycle. Its view is that Treasury-market swings below the threshold are unlikely to cause a systemic crash in risk assets.

Credit spreads remain below their long-term average, while the VIX is under 20. Societe Generale cites those measures as signs that systemic risk remains contained.

The bank expects rates to peak at 4.5%. It points to supply-driven inflation, fiscal constraints and a more divided economy as factors that limit central banks' ability to tighten policy.

The assessment also relates to earlier coverage of the gap between Treasury volatility and stock and crypto volatility.