Stock Market Faces Crucial Test as Treasury Yields Surge
The stock market faces a key test as a round of government auctions approaches, which will determine the demand for U.S. government debt. The recent rise in Treasury yields, driven by concerns about the deteriorating fiscal outlook, has spooked investors. The upcoming auctions of $103 billion in 3-, 10-, and 30-year Treasurys will reveal whether buyers are deterred by Fitch Ratings' downgrade of the U.S. government's top AAA rating. The market's ability to absorb the increased supply without hiccups is complicated by still-elevated inflation, better-than-expected economic growth, and the possibility of more rate hikes by the Federal Reserve. Some experts believe that higher rates will be met with solid demand, while others expect yields to continue rising, potentially impacting stock valuations.