Overnight, the yield of 10-year US Treasury bonds reached over 4.8, the highest since 2007. The sharp rise in the yields of long and short-term Treasury bonds also led to a sharp drop in emerging markets and US stocks after the National Day holiday. Why did the yield of Treasury bonds rise so fast? I think there are several reasons:

1) Supported by economic fundamentals, the US manufacturing PMI released the night before was higher than expected, rising for two or three consecutive months. In addition, the number of job vacancies in September announced last night jumped to 9.6 million, far exceeding expectations. The economic fundamentals are strong and employment continues to be resilient. Then the market is worried that inflation will slow down in the future (CPI has rebounded slightly in July and August, and the high base effect of core CPI disappears after September) or even recur.

2) Furthermore, the speeches of Powell and other Fed governors after the Fed's interest rate meeting in late September were relatively hawkish. For example, Cleveland Fed President Mester said last night that if the economy remains in its current state, the same as what she saw at the September meeting, she would support further rate hikes at the next Fed meeting in November.

At the same time, Atlanta Fed President Bostic said that U.S. economic growth is slowing down and inflation is declining. The Fed has no urgency to raise interest rates again, but it may take a long time before it is appropriate to cut interest rates.

These speeches all point to one meaning, that is, there is no certainty of interest rate hikes this year (there is a certain probability that it will happen again), but there is no prospect of interest rate cuts. As mentioned before, the risk of repeated inflation in the later period is very high. As the Fed is at the end of tightening, it is natural to choose more hawkish remarks to face the market to suppress optimistic expectations. However, these tough remarks will naturally affect the market's judgment on the future trend of interest rates and inflation. The more uncertain the situation is, the heavier the pessimism will be.

3) One of the components of the U.S. Treasury yield, the term premium - a measure of the compensation investors require for long-term loans - turned positive for the first time since June 2021. The term premium is an important concept in the bond market, but its specific value is difficult to quantify. It refers to the risk compensation that investors require for holding Treasury bonds until maturity. For most of the past decade, the term premium has been below zero. The increase in the premium this time reflects the high uncertainty of the economic outlook and monetary policy.

4) Of course, we have to look at another point. We have talked about it before. We usually look at the yield of US Treasury bonds, and rarely look at the price trend of US Treasury bonds. As I have posted before, we can see that the price of 10-year US Treasury bonds entered a rapid decline in May and June this year. The price dropped sharply, which was obviously a strong sell-off. May was the period of the US debt ceiling, and some holders sold US Treasury bonds due to uncertainty. After June, the debt ceiling was resolved, and the Ministry of Finance began large-scale Treasury bond issuance. The proportion of short-end Treasury bonds issued in the early stage was large, and the proportion of long-end Treasury bonds issued in the recent period was large. Some holders also sold old bonds to buy new bonds. Of course, the second and third quarters were also the most intense stage of financial game between China and the United States. China has also continued to sell US Treasury bonds in the past few months. These have led to a sharp drop in Treasury bonds and a surge in yields. #一起来跟单 #注意资金安全 #美联储是否加息？ #带你看看币安Launchpad #BTC