Yardeni Says Stocks Are Fine Unless 10-Year Treasury Yield Tops 5%

"A 4% to 5% range for the 10-year yield isn't negative for the economy or corporate earnings"

"If the 10-year yield rises above 5%, buying demand should be strong enough"

Ed Yardeni, who coined the term "bond vigilantes," said the recent rise in Treasury yields is not yet enough to undermine the stock market. In his view, conditions remain manageable as long as the benchmark 10-year Treasury yield stays below 5%.

Speaking on Aug. 18, the president of Yardeni Research said it is "not time to hit the panic button yet." That could change, however, if the benchmark 10-year yield rises much further from current levels.

"Bond vigilantes" refers to investors who collectively sell government bonds and drive yields higher to pressure governments when they believe policies are fueling excessive fiscal deficits, rising debt or inflation.

Yardeni said he is maintaining his longstanding view that the 10-year Treasury yield can trade in a "normal" 4.00% to 5.00% range without hurting the economy or corporate earnings. In a letter to clients, he added that he is watching bond-vigilante activity more closely as yields approach the top of that range.

The 10-year Treasury yield stood at about 4.73% on the day. It last rose above 5% in 2023 and has not reached that level since.

The 30-year Treasury yield climbed as high as 5.3% that day. Long-term government bond yields have also been rising in Germany, France, the UK and Japan.

Yardeni told CNBC's "Squawk Box" that buying demand would likely be strong enough if yields reach around 5%, as they did in 2023. He also said Federal Reserve policy and moves in oil prices remain risk factors for the bond market.

The Fed is scheduled to release minutes from its July policy meeting on Aug. 19, and bond yields could continue rising this week.

Kim Jung-a, guest reporter