10-Year Treasury Yield Shock & Asset Transmission Simulator

Macro Shock Scenarios

MODEL ENGINE

Ground-Truth Presets

10-Year Treasury Yield (UST) 5.25%

Benchmark risk-free rate determining global discount hurdles.

Pre-Shock Baseline Yield 3.80%

Starting point to measure delta and capital loss mark-to-market.

10-Year TIPS Breakeven (CPI Exp.) 2.35%

Implies a Real Yield of 2.90%.

Equity Risk Premium (ERP) 1.60%

Cost of equity hurdle = 10Y Yield + ERP = 6.85%.

Mortgage Spread over 10Y 2.75%

Historical MBS spread producing 30-year conforming mortgage rate.

Yield Shock Delta +145 bps From 3.80% baseline

10Y Bond Price Loss -10.6% Modified Dur: 7.8 yrs

30Y Fixed Mortgage 8.00% Monthly pmt: +38.4%

60/40 Portfolio Hit -12.2% Stock + Bond correlation flip

Multi-Year Yield Benchmark & Duration Sensitivity Curve

Yield 5.25% vs Historical Benchmarks

Bars indicate mark-to-market capital loss across maturities (2Y, 5Y, 10Y, 30Y TLT). Engine computed: active

EQUITY MULTIPLE COMPRESSION 17.2x

-13.3%

S&P 500 fair-value forward P/E compresses from 19.8x as the discount rate rises to 6.85%. High-multiple tech growth face steepest discounting.

U.S. DEBT INTEREST BURDEN $35.2T

$1.18T / yr

Annualized net interest outlays exceed defense spending. Each +100 bps adds ~$240B in annual rollover refinancing expenses over 36 months.

REAL 10-YEAR TIPS YIELD TIPS SPREAD

+2.90%

Real cost of capital at 17-year highs. Restricts corporate Capex, crushes commercial real estate capitalization rates, and incentivizes risk-free T-bill cash hoarding.

Cross-Asset Transmission & Repricing Breakdown

Mark-to-Market Projections

Asset / Instrument	Key Metric	Baseline	Shock State (5.25% 10Y)	Capital Impact	Transmission Channel

Model live: 5.25% yield shock fully propagated across 6 asset classes.

Export Scenario CSV

Methodology, Valuation Formulas & Macro Transmission Architecture

1. Modified Duration & Convexity Losses:
Bond price percentage change is modeled as $\Delta P/P \approx -D_{\text{mod}} \cdot \Delta y + \frac{1}{2} C \cdot (\Delta y)^2$. For a 10-Year Treasury bond with 7.8 years duration and convexity of 72, a +145 bps increase drives an immediate -10.6% mark-to-market loss.

2. Equity Discount Rate & P/E Compression:
Under the Gordon Growth and Fed Earnings Yield models, required equity return is $k_e = R_f + \text{ERP}$. As risk-free rate $R_f$ advances to 5.25%, equity earnings yield $E/P$ must expand, compressing P/E from $1 / (k_e - g)$. Tech and high-duration growth assets experience double the drawdown of value sectors.

3. Housing & 30-Year Mortgage Transmission:
Conforming 30-year mortgage rates track 10-Year Treasuries plus the primary-secondary mortgage spread (historically 180 to 280 bps due to prepayment risk and MBS supply). At a 5.25% yield + 275 bps spread, 8.00% mortgage rates raise monthly principal and interest on a $400,000 loan to ~$2,935/mo.

4. 60/40 Portfolio Breakdown:
In high-inflation yield shocks, stock-bond correlation turns positive ($\rho > 0$), destroying traditional fixed-income hedging benefits. Both equities and long bonds decline simultaneously.