Investors may have become accustomed to the Afterpay Ltd (ASX: APT) share price only going in one direction… up.
But today marks a gritty 8% sell-off for the ASX market's beloved buy now, pay later (BNPL) leader.
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Why is the Afterpay share price slumping?
There has been no market-sensitive news out of the BNPL giant today nor from its peers such as Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) that could affect its share price. Brokers have also yet to provide any updates or new target prices leading into Afterpay's half-year results this week.
With no immediately identifiable cause, the one thing that could potentially be weighing on the Afterpay share price was the US market overnight and rising bond yields.
10-year Treasury yield are eyeing 1.40% for the first time since February 2020. On a rapidly rising trajectory, the 10-year Treasury yield has surged from record all-time lows of 0.50% in August 2020 to 1.37% last night.
And rising yields are raising concerns that higher borrowing costs could derail the roaring equity markets.
Growth and tech shares are most vulnerable to rising yields because they are already viewed as richly valued. As yields go higher, the future cash flows of growth shares are discounted more heavily, reducing the company's value today.
The bigger picture
It's not just the Afterpay share price taking a hit today.
Sectors including energy, materials, industrials and financials typically benefit from higher yields. However, it's a very different story regarding ASX growth shares in sectors including consumer discretionary, consumer staples, healthcare and information technology.
The biggest losers on the ASX today could all be described as growth shares and trading at significantly higher price-to-earnings (P/E) ratios.
Current leading ASX 200 decliners at the time of writing include:
