Bank of America Warns of Risks if US Treasury Yields Exceed 5%

Key Facts

1Bank of America strategist Michael Hartnett believes the U.S. economy is in a nominal boom driven by government spending rather than productivity gains.

2The bank warned that long-term Treasury yields breaking above 5% could threaten federal debt sustainability and equity performance.

Bank of America strategist Michael Hartnett has characterized the U.S. economy as being in a "nominal boom" fueled by massive government spending rather than organic productivity gains. The bank warned that if long-term Treasury yields break above the 5% threshold, it could severely threaten federal debt sustainability and overall equity performance. This fiscal-driven growth, coupled with rising prices, makes the broader economy highly sensitive to elevated interest rates and borrowing costs. Analysts suggest that the current economic expansion lacks the structural productivity needed to withstand a prolonged spike in bond yields. Consequently, the bank maintains a cautionary outlook on the potential for a fiscal crisis if yields continue their upward trajectory. Such a scenario could trigger significant volatility across global financial markets and pressure risk assets.