There is a number in bond markets that equity investors should be watching very carefully. According to Alain Bokobza, head of global asset allocation at Societe Generale, that number is 5%, and the one beyond it that should genuinely concern investors is 6%.
Bokobza’s argument is straightforward: once Treasury yields climb high enough, the cost of borrowing stops being a nuisance and starts being a ceiling. Corporate earnings growth, however resilient it might look on paper, cannot outrun financing costs indefinitely.
Where the math starts breaking down
The 5% mark on the 10-year Treasury is where Bokobza flags that higher borrowing costs begin to outweigh earnings growth, creating genuine downward pressure on equity valuations. The 6% level represents something more severe: a threshold where the pressure moves from marginal to structural.
Strategists more broadly have been treating the 4.8% and 5% zones as points where asset spillover risks escalate. In that framing, Bokobza’s 6% warning sits at the far end of a zone that markets are not yet pricing as a base case, but can no longer fully dismiss.
Current 10-year Treasury yields have been trading around 4.1%, though near-term market expectations suggest yields could test the 4.7% to 4.8% range.
Societe Generale’s actual portfolio stance
Despite Bokobza’s yield warnings, the bank is not running from equities. As of December 2025, Societe Generale maintained an overweight position on stocks, with particular conviction in the US and European markets.
The bank’s underweight call, notably, lands on bonds and Treasuries themselves. That is a counterintuitive stance worth unpacking: Societe Generale is saying yields are high enough to threaten equities at the margins, yet not high enough to make Treasuries attractive relative to other opportunities.
Fiscal dynamics are the variable that most analysts flag as unpredictable. Persistent government deficits require continued bond issuance, which pressures yields upward regardless of what the Federal Reserve does with its policy rate. This supply-side pressure on yields operates independently of the inflation cycle.
What rising yields actually mean for equity markets
The most direct channel is valuation compression. Equity prices are essentially the discounted present value of future earnings, and the discount rate used in that calculation is tied to prevailing interest rates. Higher rates mean future earnings are worth less in today’s dollars, which pushes price-to-earnings multiples lower even if earnings themselves do not fall.
The second channel is earnings themselves. Companies carrying floating-rate debt see interest expenses rise directly with yields. Those costs flow straight through to net income, reducing the earnings that the market is discounting in the first place. Growth-oriented companies, which tend to carry more debt and generate more of their value from earnings projected years into the future, feel both channels simultaneously and more acutely.
The third channel is behavioral. When yields on ostensibly risk-free government bonds rise high enough, the relative attractiveness of equities diminishes. Investors managing liability-driven portfolios, such as pension funds, begin reallocating toward fixed income as the yield math makes that shift defensible. That reallocation creates selling pressure on equities that is mechanical rather than sentiment-driven.
Sectors most sensitive to this dynamic include real estate, utilities, and any capital-intensive industry where companies routinely issue debt to fund growth.
Bokobza’s framing of 5% and 6% as distinct thresholds reflects this layered transmission mechanism. The 5% level is where valuation pressure becomes undeniable. The 6% level is where earnings-level damage and behavioral reallocation combine into something that looks less like a correction and more like a regime shift.