For 30 years, US bonds have failed to hold the "life and death line" of 5%! Bank of America's Hartnett: The "door to hell" has been opened. Early June is a "selling window"

US bond yields break 5%, US stocks hit new highs simultaneously, with Michael Hartnett, Chief Investment Strategist at Bank of America, issuing a warning: asset boom rallies often end when yields rise rapidly, combined with market funds flocking to the stock market, and inflation risks continue to heat up, the beginning of June will be a window for profit-taking. According to the Wind Trade Exchange, in his latest report, Hartnett stated that the 30-year US bond yield touched 5.11%, surpassing the key 5% level, and is about to break through years of resistance, which may trigger a historic impact on risk values, leading to a rapid surge in yields. Looking back at history, bubbles often burst with a rapid rise in yields, and once the 5% level is severely breached, the door to disaster will open. At the same time, in the "Flow Show" weekly report, Hartnett wrote, "The retreat in bullish incentives towards stocks and technology stocks may be completed in the coming weeks, and the beginning of June is a suitable time to reduce holdings." He pointed out that June will see a series of key events, including the seventh OPEC meeting, the opening of the World Cup, the G7 summit, and the first FOMC meeting hosted by Kevin Warsh at the Federal Reserve, all of which could trigger cautious sentiment in the market. Inflation data provides direct evidence for this warning. The US April PPI rose to 6% year-on-year, the fastest growth since 2022; the CPI rose to 3.8% year-on-year, exceeding economists' expectations. Hartnett's team calculates that if the monthly sequential growth rate of 0.4% over the past six months does not slow down rapidly, the US CPI will surpass 5% before the midterm elections in November. This outlook poses significant pressure on the stock market. The "Maginot Line" of US bonds has been breached Hartnett previously warned that if the 30-year US bond yield "completely breaches the 5% Maginot Line," it would be the "gateway to doomsday." Now, that gate has been pushed open - with the 30-year yield closing at 5.11% last Friday, exceeding the vigilance line by 11 basis points and breaking through multiple technical resistance levels since 2023. Once a confirmed breakthrough occurs, long-term interest rates may skyrocket by several standard deviations in a single day, triggering a massive deleveraging wave. The long-term uptrend line of the 10-year US bond has also been officially broken. History repeatedly confirms that the end of a bubble is always accompanied by a sharp rise in yields: in 1989, Japanese government bond yields rose by 230 basis points, and in 1999, US government bond yields jumped by 260 basis points. Now, the Nasdaq and the 10-year yield are synchronously rallying on an annual basis, forming a "clear echo" of the turning points in 1989 and 1999. Inflation alert: CPI breaking 4% is the "domain of risk assets" Hartnett defines crossing the 4% threshold of the CPI as the critical point when risk assets begin to become "restless." He cites historical data from the past 100 years, pointing out that once inflation crosses this threshold, the S&P 500 index typically falls by an average of 4% in the following three months and 7% in the following six months. Current inflation pressures are showing a widespread trend, covering areas such as energy, electricity, transportation, commodity prices, and rents. The heating up of inflation expectations has pushed the 10-year US bond yield above 4.5% and the 30-year US bond yield past 5% - levels Hartnett previously referred to as the "Maginot Line." The Bank of America team predicts that if monthly sequential growth rates stay at 0.4%, the CPI will reach 5.2% by the end of the year; even if the growth rate slows to 0.3%, the year-end CPI will still rise to 4.4%, well above the Federal Reserve's 2% target. Bullish sentiment approaching extremes, multiple indicators issuing warnings Bank of America's Bull & Bear Indicator rose from 7.2 to 7.6 this week, nearing the 8.0 level that triggers a "sell signal." The Hartnett team points out that if global stock fund inflows reach $15-20 billion over the next two weeks, emerging market debt and high-yield bond inflows each reach around $2 billion, and the May fund manager survey shows a decrease in cash positions from 4.3% to 3.8%, this indicator will trigger a sell signal within two weeks. Data on positions from private client portfolios also confirms the market's extreme optimism. Bank of America manages $4.5 trillion in assets, with a stock allocation ratio rising to 65.7%, hitting a historical high, and cash allocations dropping to 9.8%, also at a historical low. Since the low point on March 30, the S&P 500 index has rebounded by 18%, and the Nasdaq 100 index has surged by 29%, driven by the AI boom pushing semiconductor and related stocks to record highs. The semiconductor index SOX is currently 62% above the 200-day moving average, with Hartnett comparing this level to extreme cases in history such as the Mississippi bubble and the dot-com bubble - the average deviation at the peaks of major historical bubbles was only 35%. Stocks and bonds simultaneously attracting funds The latest week's fund flow data shows $28.1 billion inflows into bonds, $20.5 billion inflows into stocks, $5.8 billion inflows into cash, $2 billion inflows into gold, and $1.3 billion outflows from cryptocurrencies, the largest single-week outflow since February 2026. By market segment, large-cap US stocks saw $24.4 billion inflows in a single week, the largest in nearly five weeks; technology stocks saw $5.4 billion inflows, the largest in nearly three months; infrastructure funds recorded a historical high of $1.5 billion inflows. Investment-grade bonds saw cumulative inflows of $42.2 billion in the past four weeks, the largest four-week inflow since March 2026; treasury bonds have seen continuous inflows in the past three weeks, with a single-week inflow of $5.6 billion, the largest in nearly six weeks. New Fed Chairman taking office and political risks add further variables The Hartnett team also noted that historically, within three months of a new Federal Reserve Chairman taking office, US bond yields have typically increased by around 50 basis points on average. If this pattern repeats with Kevin Warsh, the 2-year US bond yield may rise to 4.53%, and the 10-year yield may rise to 4.93%. On the political front, Hartnett cited data from local elections in the UK, showing that the vote share for non-mainstream parties such as the Reform Party and the Green Party surged from 3% to 41%, while traditional parties such as the Labour Party and the Conservative Party saw their share drop sharply from 92% to 54%. He believes that extreme politics and extreme price trends on Wall Street are interrelated, and that the erosion of people's living standards by inflation is the fastest way for rulers to lose voter support - Trump's support on inflation issues has dropped to 30%, near the low point during the Biden era. Hartnett warns that this slow-burning fuse may trigger a large-scale asset rotation from chips and commodities to consumer sectors in 2027. This article is compiled from "Wall Street News," by authors: Bu Shuqing, Li Jia, GMTEight, edited by Zhang Jinliang.