This is the big risk that stock investors should be watching as rising bond yields menace markets

Rising global bond yields have renewed concerns that higher borrowing costs could pull U.S. equities into correction territory. But strategists at BofA Global Research suggest the more consequential risk may lie elsewhere, arguing that the headline fear of a yield spike obscuring other vulnerabilities deserves closer scrutiny.

The mechanism matters for investors. Yields rise when bond prices fall, and that repricing can pressure equity valuations by lifting the discount rate applied to future corporate earnings. It can also tighten financial conditions more broadly, affecting everything from corporate refinancing to consumer credit. When yields climb quickly, markets often struggle to adjust, which is why the pace of the move tends to matter as much as the level itself.

What to watch: whether the yield increase reflects stronger growth expectations or rising inflation and term-premium concerns. The former can coexist with equity gains; the latter has historically been less comfortable for stocks. Also watch whether credit spreads widen in tandem, and whether earnings estimates hold up. For now, the debate is less about a single threshold and more about the underlying driver of the move.