It could be a bad day for the markets once the yield on the benchmark 10-year Treasury hits 3 percent, closely followed trader Art Cashin told CNBC on Thursday.
"That 3 percent level is both a target and a kind of resistance. Everybody knows it's like touching the third rail," said Cashin, UBS director of floor operations at the New York Stock Exchange. "The assumption is once they do it, all hell will break loose. So we'll wait and see."
As of early Thursday, the 10-year yield was slightly lower, around 2.91 percent, down from Wednesday's four-year high of 2.95 percent. Wall Street fears returned Wednesday afternoon after minutes from the Federal Reserve's latest meeting sent bond yields rising and stocks into a tailspin. The last time the 10-year yield traded above 3 percent was in January 2014.
"Initially, yields moved down, stocks rallied like crazy," Cashin recalled about Wednesday, moments after the Fed minutes were released. "Then about eight minutes into that move, stocks looked back and noticed bonds had changed their mind."
The sharp moves seen Wednesday were probably due to "our friends, the long-lost 'bond vigilantes,'" Cashin told "Squawk on the Street."
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