The U.S. 10-year Treasury yield topped 5.35% this week, its highest level since 2002.
The force behind this latest bond selloff is the term premium. This measure captures the extra compensation investors demand for holding 10-year Treasuries rather than continually rolling over short-term securities. Minneapolis Fed President Kashkari has compared it to dark matter in the bond market. Bloomberg macro strategist Frank Monkam estimates that the 10-year term premium has risen to a 12-year high.
Supply is also ramping up. U.S. companies have issued $1.69 trillion in bonds so far this year, about 30% more than over the same period last year, with average yields rising to 5.97%. New debt issued by companies including Oracle, Broadcom, and SpaceX to fund AI infrastructure totals nearly $500 billion. Bridgewater founder Ray Dalio has described the combination of this massive borrowing and rising interest rates as the stretch before a bubble begins to burst.
Bank stocks are under pressure too. The S&P 500 Banks Index has fallen about 7.5% over the past month. From October 7 to 9, OCBC fell more than 10%, DBS Group dropped 6.72%, and UOB fell 8.81%. On the 7th, JPMorgan downgraded CIMB from Neutral to Underweight and AmBank from Overweight to Neutral, citing the risk that surging long-term bond yields would increase mark-to-market losses in banks’ trading books.
U.S. Treasury Secretary Bessent disclosed that the U.S. national debt has climbed to about $41 trillion, and that a fiscal consolidation plan will not be announced until after the midterm elections.
Earnings season kicks off next Tuesday, with JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo first to report their third-quarter results. The market expects headline CPI to rise 3.7% year over year in September and core CPI to increase 2.5%.
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The force behind this latest bond selloff is the term premium. This measure captures the extra compensation investors demand for holding 10-year Treasuries rather than continually rolling over short-term securities. Minneapolis Fed President Kashkari has compared it to dark matter in the bond market. Bloomberg macro strategist Frank Monkam estimates that the 10-year term premium has risen to a 12-year high.
Supply is also ramping up. U.S. companies have issued $1.69 trillion in bonds so far this year, about 30% more than over the same period last year, with average yields rising to 5.97%. New debt issued by companies including Oracle, Broadcom, and SpaceX to fund AI infrastructure totals nearly $500 billion. Bridgewater founder Ray Dalio has described the combination of this massive borrowing and rising interest rates as the stretch before a bubble begins to burst.
Bank stocks are under pressure too. The S&P 500 Banks Index has fallen about 7.5% over the past month. From October 7 to 9, OCBC fell more than 10%, DBS Group dropped 6.72%, and UOB fell 8.81%. On the 7th, JPMorgan downgraded CIMB from Neutral to Underweight and AmBank from Overweight to Neutral, citing the risk that surging long-term bond yields would increase mark-to-market losses in banks’ trading books.
U.S. Treasury Secretary Bessent disclosed that the U.S. national debt has climbed to about $41 trillion, and that a fiscal consolidation plan will not be announced until after the midterm elections.
Earnings season kicks off next Tuesday, with JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo first to report their third-quarter results. The market expects headline CPI to rise 3.7% year over year in September and core CPI to increase 2.5%.
#美债 #银行股 #BTC