The 10-year US Treasury yield has touched 5%, and the market is holding its breath awaiting the Federal Reserve's action. Looking back at recent trends, after months of fluctuating upward movement, the 10-year yield is once again approaching the 5% mark. Real yields and term premiums are rising in tandem, and expectations of "higher and longer interest rates" are continuously strengthening. This makes the long end of the money market the most susceptible to amplified volatility in this round of global interest rate repricing. Logically, a rate hike should soothe the long-term market, but the long-term market is extremely volatile. The 25 basis point rate hike, in a sense, precisely confirms the trend of the long-term market over the past few months; from this perspective, it could also become an excuse for yields to break through 5% again and continue to rise—if the Fed confirms a tightening path, it could actually legitimize further increases in the long end. On the positive side (productivity), the negative side (issuance pressure), and the ugly side (the Iran war and inflation), Federal Reserve Chairman Warsh is well aware that the 10-year Treasury yield is looking for an excuse to climb back above 5%. A 25-basis-point rate hike might, and should, help. That said, the 10-year yield is likely to test 5% again regardless of whether the Fed raises rates or not. In fact, the high yield is mainly due to rising real yields. As long as this reflects expectations of productivity growth (the positive side), broader issuance pressure (the negative side), or the evolving impact of the Iran war on oil prices (the ugly side), the Fed is largely powerless to change it. Specifically, improved productivity expectations will revise upwards on potential economic growth and the neutral interest rate (r), providing fundamental support for the long end; the high issuance of long-term Treasury bonds against the backdrop of a deficit will lead the market to demand a higher term premium to absorb supply, which is unrelated to monetary policy orientation; and the Iranian situation pushing up oil prices will indirectly transmit to the long end through the repricing of inflation expectations and policy paths. ING's strategy team believes that under the combined effect of these three forces, monetary policy alone is unlikely to truly "cap" the long-term yield. 5% is not mysterious: a psychological threshold rather than a technical watershed. Many market discussions suggest that a break above 5% in the US 10-year yield would be a key point, triggering macroeconomic and debt dynamics pressures. However, 5% is not mysterious—it's simply a 50-basis-point concession above the neutral value range of 4% to 4.5%. Of course, it will indeed push up mortgage and other financing rates, thus creating macroeconomic pressure; as long as the US Treasury continues to finance with long-term maturities, debt dynamics will worsen. But apart from that, the difference in impact between 4.9% and 5% is practically zero. Analysts from multiple institutions also point out that 5% is more like a psychological psychological threshold than a technical watershed—the debate over the "key point" when yields touched 5% intraday in October 2023 serves as a precedent, proving that the dominant factors were always real interest rates and supply expectations, not the point itself. From a transmission mechanism perspective, the 10-year yield serves as the pricing anchor for mortgage and corporate financing costs. Each step up tightens financial conditions, which is the root of the macroeconomic significance of 5%. The next number is 6: The journey to 6% The real question is what will happen next. Numerically, the next number after 5 is 6. The big question facing the market is: will the 10-year yield now move towards 6%? ING previously pointed out that a move from 5% to 6% wouldn't necessarily be catastrophic. This doesn't mean it's good for the market—absolutely not. And the speed is crucial: a surge to 6% within the next month or so could cause considerable disruption; while a more gradual process, such as extending to about six months, might mitigate the market's reaction. Historical experience shows that the pace of yield increases often determines market resilience more than the absolute level: rapid increases easily trigger a negative feedback loop of deleveraging, convex hedging, and passive stop-loss orders, amplifying volatility; a gradual increase allows long-term investors time to enter the market in batches. The ING team frankly admitted that the current projection is not a simple linear extrapolation to 6%, but if supply pressures and geopolitical factors continue to escalate, 6% is not an inconceivable scenario. This is not a prediction, but a deduction: ING does not predict that yields will reach 6%; it is more of a scenario-based deduction. Furthermore, such a trend should also be somewhat restrained, as long-term value investors tend to at least begin building positions in stages. This may not be for near-term positive market capitalization, but to reflect the reality that yield peaks are difficult to predict accurately. Meanwhile, all of this can be mitigated by cooling inflation (widely expected in 2027) and the subsequent accumulation of expectations for interest rate cuts (also expected in 2027). However, for now, the market is navigating a dangerous path, which could make the remainder of 2026 quite difficult. Tense markets could trigger significant volatility . The broader market is finding it increasingly difficult to maintain overall stability. The stock market is still holding firm, but the VIX, a risk indicator, has clearly moved away from its previous lows; in addition, implied interest rate volatility has surged, reaching levels not seen since April. Volatility structure shows that the VIX's exit from its lows coincided with a rise in implied interest rate volatility, indicating that investors are simultaneously pricing in tail risks for both the stock and bond markets. With equity markets at historical highs, their sensitivity to rising interest rates has increased significantly. Once long-term rates break through key levels, the risk of a "double whammy" in both stocks and bonds cannot be ignored. The market is clearly becoming tense, meaning any setback could trigger significant volatility. So far, growth data has been strong, prompting a significant readjustment of pricing in central bank reaction functions. Coupled with historically high stock markets, downside economic risks appear to have receded. However, with oil prices jumping daily and European natural gas prices far exceeding previous highs, substantial risks still lurk ahead. The Buffer and Boundaries of Real Yields Real yields have risen significantly since earlier this year, providing a buffer for bondholders during economic downturns. Theoretically, even with continued energy price increases, real yields could fall; however, this has not been the case so far. Positive economic surprises and concerns about high issuance have driven real yields higher. But once the economy declines, this narrative could quickly reverse, pulling yields down. The buffer provided by rising real yields lies in the fact that if an economic downturn causes nominal yields to fall, the downward space for real yields will provide capital gains support for the bond market. However, if weak growth and sticky inflation coexist, the "buffer" logic may be disproven, at which point real and nominal yields may face pressure in the same direction. ING analysts believe that marginal changes in growth and inflation will determine whether long-term yields remain around 5% or embark on a journey towards 6%. Conclusion In summary, 5% itself is not the end point. The real game in the market lies in the subsequent path and pace: in the short term, it depends on the Fed's interest rate decision and inflation data; in the medium term, it depends on supply pressures, geopolitical risks, and the direction of real yields—these variables will jointly determine whether the 10-year US Treasury yield can break through 6%.