Jim Cramer Warns Rising Treasury Yields Could Signal Bigger Market Risks Despite AI Rally: 'Bond Sellers...Have Been Anything But Stupid'

CNBC commentator Jim Cramer warned that strength in leading AI stocks may be obscuring mounting stress in the U.S. Treasury market. On Monday, Nvidia Corp. (NASDAQ:NVDA), Microsoft Corp. (NASDAQ:MSFT) and Meta Platforms Inc. (NASDAQ:META) powered gains in the Nasdaq, which closed 1.05% higher at 27,477.31, while the 10-year Treasury yield exceeded 5.34% and the 30-year yield approached 5.7%. The S&P 500 gained 0.66% to close at 7,773.95. Cramer linked the market’s unusual divergence to company-specific catalysts. Nvidia has benefited from strong customer returns on its newest chips, while Microsoft has seen improved investor sentiment around its Copilot AI assistant. Meta has attracted attention for Muse, its personal-agent application, and its potential to deepen relationships with small businesses The “Mad Money” host said weakness in defensive stocks and utilities shows that higher bond yields are pressuring income-oriented equities, as bonds now offer more attractive yields than they did months ago. "We have so many stocks of so many companies that can’t rally until interest rates reach a level where selling bonds is plain stupid," Cramer said. Cramer said the S&P 500 and Nasdaq’s strength should not be viewed as an all-clear, arguing that the bond market may provide a better signal for Wall Street’s direction until rising-rate pressures ease. He said continued Treasury selling could reflect substantial government borrowing, demand for data-center financing or hedge funds positioning against bonds. Cramer said the weaker-than-expected jobs report last week briefly pushed down Treasury yields and rate-hike expectations, but the relief lasted less than a day. "The only conclusion: the bond sellers so far have been anything but stupid," Cramer said. Read Also: Gold Is Defying 24-Year-High Treasury Yields. Will Gold ETFs Follow? Bond Rout Raises Debt Spiral Fears The bond-market pressure predates Monday’s rally. On September 30, the 30-year Treasury yield reached 5.63%, its highest level since June 2002, despite cooler-than-expected inflation data. The yield also rose for seven consecutive sessions, marking its longest such streak in two years. Higher long-term borrowing costs can increase financing pressure across the economy, including for data-center construction. Investor Ross Gerber last month warned that rising Treasury yields are putting pressure on the U.S. debt outlook, arguing that sustained 5% yields could trigger a debt spiral. He said higher rates are hurting bondholders and could either curb government spending or lead to a broader crisis. Echoing this, economist Peter Schiff warned that the U.S. is entering a "high debt, high interest rate" era, arguing that rising borrowing costs are exposing the risks of America’s massive debt burden. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Read Also: S&P 500 Could Crash Over 35% to 5,000 by 2027 If AI Boom Turns Down, Analyst Warns — Upcoming Earnings Season May Offer 'Critical Reality Check' Image via Shutterstock