The market once considered 5% for the 10-year US Treasury yield as a critical threshold for risky assets, a level that triggered the financial crisis in 2007. However, now that yields have broken through 5%, US stocks have not experienced the expected deep correction. In fact, institutions have raised their assessment of the interest rate pressure threshold to 6%, with some even pointing to 7%. This article analyzes the changes in asset pricing under a high-long-term bond yield environment from four dimensions: shifts in market psychology, sources of resilience in the equity market, the profitability paradox of the banking sector, and the potential risks of optimistic expectations. Reshaping Perceptions of Interest Rate Thresholds: 5% is History, Risk Threshold Continues to Rise Investors' judgments on the "dangerous level" of US Treasury yields are not fixed but evolve dynamically with market conditions. The historical experience of 2007 led the market to long regard 5% for the 10-year US Treasury yield as a watershed for stock market pressure. However, even after yields actually exceeded 5%, the equity market remained resilient. A Bank of America global fund manager survey shows that 64% of fund managers believe that only when the 10-year US Treasury yield rises to 6% will the stock market experience a substantial shock. Many institutions judge the pressure threshold to be even higher, and the market has begun to discuss the possibility of "6.5% becoming the new 5%, or even 7%." Current mainstream institutional expectations are optimistic: most fund managers believe that yields in this cycle are unlikely to reach 6%, and long-term interest rates are likely to decline subsequently. Many well-known bond market bears have turned cautiously bullish: Pimco has reduced its underweight position in US Treasuries, and Blackstone is bullish on short-term bonds. Supporting this expectation is the market's perception that the hawkish panic triggered by the Jackson Hole meeting was over-interpreted, and the New York Fed president's signal that no rate hikes are needed next year eased tightening expectations. This shift in market expectations is essentially an adaptive repricing by asset allocation entities to a macroeconomic environment of "high interest rates lasting longer." However, it's important to clarify that psychological acceptance of high interest rates does not equate to asset prices having fully absorbed the tail risks of rising interest rates. This optimistic assessment of deferred risk inherently carries significant uncertainty. The resilience of US stocks in a high-interest-rate environment: Technology earnings serve as a valuation buffer. Under the classic valuation framework, rising risk-free rates increase the discount rate, suppressing growth stock valuations. However, during this round of rising long-term bond yields, US stocks have maintained resilience, primarily due to the strong earnings of the technology sector. Barclays estimates that the semiconductor sector accounts for nearly one-fifth of the S&P 500's market capitalization and contributes over one-third of overall earnings growth; Bloomberg's SOX semiconductor index earnings forecasts continue to rise. Capital expenditure intensity is a key variable in whether this round of technology boom can continue. A few leading companies continue to make large-scale capital expenditures, widening the profit gap. The current AI industry cycle's capital expenditure is characterized by a clear concentration among leading companies. Large investments by a few giants dominate overall industry profit expectations, and the industry's prosperity is highly dependent on the sustainability of these leading companies' capital expenditure plans, posing significant single-point risks. Fund managers' optimistic pricing is based on the assumption that AI will drive the continuation of the capital expenditure cycle. If capital expenditure slows down, the suppressive effect of high long-term bond yields on stock valuations will quickly become apparent. The September US CPI data is the next key observation window; the inflation reading will directly affect the Fed's policy expectations and influence the direction of long-term bond yields, serving as a crucial juncture for verifying the current market logic. As a core indicator measuring the stickiness of service and goods inflation, if the CPI reading exceeds expectations, the market will reprice the duration of the Fed's tightening policy, and long-term US Treasury yields may surge again. The banking sector, driven by rising interest rates: Net interest income hits new highs, valuation logic has reversed. The traditional paradigm believes that rising interest rates benefit bank net interest margins. Current financial reports from major US banks confirm short-term gains: JPMorgan Chase, Citigroup, and Wells Fargo collectively earned $56.5 billion in net interest income in the third quarter, marking the fifth consecutive quarter of record-high net interest income from their lending businesses; JPMorgan Chase also indicated continued growth in interest income next year, suggesting robust short-term credit demand. However, the banking sector presents a paradox: "positive earnings, weak stock prices." Many major banks' financial reports met or even exceeded expectations, yet their stock prices remain under pressure. Two core contradictions underlie this: 1. Deteriorating yield curve. Selling long-term bonds leads to a flattening yield curve, compressing the spread between deposit and loan interest rates; further inversion of the curve is both a warning sign of economic recession and a direct erosion of lending profits. Commercial banks' business model naturally relies on maturity mismatch: short-term borrowing for long-term lending. A flat or inverted yield curve directly compresses arbitrage opportunities, weakening the core profit model of banks. The market no longer simply believes that high interest rates benefit banks but is beginning to weigh the long-term risks of high interest rates to bank balance sheets. 2. Diverging transaction business structures. Fixed income, foreign exchange, and commodity trading revenues generally fell short of expectations; equity trading benefited from market volatility and AI-driven equity financing, resulting in significant revenue growth and becoming one of the few bright spots in the sector. This divergence in trading performance illustrates that rising interest rate volatility has an asymmetric impact on different trading lines: fixed income is more severely impacted by rising interest rates, while equity investment banking and stock trading benefit from market volatility and the equity financing boom. In short, net interest income dividends can no longer sustain bank valuations, and investors are pricing in the long-term risks brought by high interest rates. The Undeniable Vulnerability Behind Market Optimism Currently, the market consensus is that the upper limit for long-term yields is around 6%, with interest rates quickly falling back, technology profits maintaining high growth, and the equity market weathering high interest rates. However, this scenario has significant weaknesses. The interest rate threshold exhibits non-linear characteristics. The market can gradually absorb a slow rise in yields; once the 6% threshold, a consensus among institutions, is breached, asset selling may become self-reinforcing, and historically, market crises have often erupted after this threshold was breached. The risk threshold in financial markets is not linearly smooth. Small increases in interest rates often have limited impact, but once a key psychological threshold is crossed, it triggers passive trading behaviors such as stop-loss and rebalancing, creating a negative feedback loop. Optimistic expectations are highly dependent on a decline in inflation. If the September CPI is higher than expected, expectations of Fed tightening will rise again, long-term bond yields will continue to rise, and growth stock valuations will face significant pressure. Growth stocks have their cash flow concentrated in the long term, making them far more sensitive to changes in the discount rate than value stocks. Bank profit dividends are phased. Net interest income growth is unsustainable; once credit demand declines, deposit costs rise, or the yield curve is deeply inverted, bank profits will quickly come under pressure. As market competition for deposits intensifies, rising deposit rates will gradually erode net interest margins. This is a slow variable lagging behind the interest rate hike cycle and is the underlying logic behind the market's current cautious stance on bank stocks. In conclusion, the market risk threshold for the 10-year US Treasury yield has shifted upward, and institutions generally regard 6% as a key resistance level for the equity market. Currently, US stocks are relying on technology earnings to offset the impact of rising interest rates, and the net interest income of US banks has reached a new high. However, stock prices have already priced in the risk of a prolonged period of high interest rates. The mainstream market bet is that long-term interest rates will soon fall, a judgment highly dependent on inflation trends and Federal Reserve policy. Investors need to be wary: the market's psychological adaptation to the interest rate threshold does not mean that assets can withstand infinitely higher yields. The rise in long-term interest rates is essentially a repricing process for all assets in the market. The current optimistic assumptions in the market are highly dependent on two pillars: AI capital expenditure and falling inflation. If either pillar weakens, it will trigger a rapid adjustment in major asset classes. If inflation persists and long-term bond yields approach 6% or even 7%, the currently seemingly calm risk asset market may usher in a new round of valuation reassessment.