On the eve of the Federal Reserve’s interest-rate decision on Tuesday, the U.S. Treasury bond market again experienced a sharp selloff. The yield on the 10-year U.S. Treasury jumped by more than 6 basis points to 5.025% during the session, the highest level since 2007. The yield on the 2-year U.S. Treasury also rose in tandem, up 4.4 basis points to 4.676%. At the same time, CME’s FedWatch tool showed that the market’s expectation for the Fed to raise rates by 25 basis points had surged to more than 92%.
This surge in yields was mainly driven by August inflation data remaining significantly above the Fed’s 2% target, dispelling hopes that the rate-hiking cycle would end early. While the traditional view is that when rate hikes near their end, yields in the long end would stabilize, as analysts noted, the actual game often involves large volatility. Funds are now repricing for a scenario in which “higher rates are maintained for longer.”
At the macro level, benchmark U.S. Treasury yields moving above the key 5% threshold directly boosted returns on global risk-free assets, putting widespread pressure on valuations of risk assets. Strong Treasury yields also provided firm support for the U.S. dollar index. In the short term, conventional safe-haven sectors such as stocks and precious metals face pressure from liquidity reallocation.
For the crypto market, in a high risk-free interest rate environment, the willingness of incremental funds to enter the market via over-the-counter channels has clearly cooled. Higher short-term borrowing costs also limit leverage operations. Currently $BTC is in a critical observation period for macro-policy implementation. If, after the Fed’s decision, it releases a clearer policy path, market sentiment may undergo another round of reshaping. Near-term price action still needs to be tracked objectively.
#FedWatch #BondYields #FOMC
This surge in yields was mainly driven by August inflation data remaining significantly above the Fed’s 2% target, dispelling hopes that the rate-hiking cycle would end early. While the traditional view is that when rate hikes near their end, yields in the long end would stabilize, as analysts noted, the actual game often involves large volatility. Funds are now repricing for a scenario in which “higher rates are maintained for longer.”
At the macro level, benchmark U.S. Treasury yields moving above the key 5% threshold directly boosted returns on global risk-free assets, putting widespread pressure on valuations of risk assets. Strong Treasury yields also provided firm support for the U.S. dollar index. In the short term, conventional safe-haven sectors such as stocks and precious metals face pressure from liquidity reallocation.
For the crypto market, in a high risk-free interest rate environment, the willingness of incremental funds to enter the market via over-the-counter channels has clearly cooled. Higher short-term borrowing costs also limit leverage operations. Currently $BTC is in a critical observation period for macro-policy implementation. If, after the Fed’s decision, it releases a clearer policy path, market sentiment may undergo another round of reshaping. Near-term price action still needs to be tracked objectively.
#FedWatch #BondYields #FOMC