Those who are paying close attention may have noticed that long-term U.S. Treasury yields have fallen. This inevitably raises a lot of questions, but there are really two that people are most concerned about:
With CPI and PPI so far apart, and expectations for rate hikes shifting from December to further hikes in Q1, how have long-term Treasury yields fallen despite these expectations?
We’ve been saying that high long-term yields weigh on risk assets. So why are U.S. stocks still falling now that long-term yields are down?
The logic is actually simple. Whether it’s weak macroeconomic data or the idea that long-term yields weigh on risk assets, both arguments are valid. But we shouldn’t overlook how rate hikes and long-term yields attract liquidity.
As I said last week, tighter liquidity caused by rate hikes, combined with elevated long-term Treasury yields, suppresses risk appetite and drives money into risk-free, high-yielding assets—long-term Treasuries.
Although U.S. bank stocks performed well this week, and ASML and TSMC reported strong earnings, the Q3 earnings season is only just getting started. At this stage, earnings can only show that the fundamentals behind the AI narrative have held up so far. There still aren’t enough reports for the market to know whether the entire industry is doing well.
In other words, in the short term, the AI fundamentals versus high long-term yields battle has temporarily been lost in an environment of elevated rate-hike expectations. The industry’s fundamentals are sound, but investors’ risk appetite has declined. Meanwhile, the possibility of rate hikes in December, Q1, or even later makes money more expensive. With Q3 earnings season only just beginning, investors lack confidence, so they naturally rotate into currently attractive, risk-free assets—U.S. Treasuries.
So the overall logic is simple: money flowing back into Treasuries pushes yields down. That leads to the strange short-term phenomenon of yields falling despite weak data, while U.S. stocks remain under pressure!
Another point is that after Treasuries were sold off repeatedly and 10-year and 30-year yields surged too quickly, they had already reached levels that offered investors a substantial margin of safety. Buying Treasuries now means getting yields high enough to offset inflation. Inflation is rising, so the Fed will inevitably raise rates—which means buying now still offers returns that are set to grow in the future!#沃什推动缩减前瞻指引和点阵图
With CPI and PPI so far apart, and expectations for rate hikes shifting from December to further hikes in Q1, how have long-term Treasury yields fallen despite these expectations?
We’ve been saying that high long-term yields weigh on risk assets. So why are U.S. stocks still falling now that long-term yields are down?
The logic is actually simple. Whether it’s weak macroeconomic data or the idea that long-term yields weigh on risk assets, both arguments are valid. But we shouldn’t overlook how rate hikes and long-term yields attract liquidity.
As I said last week, tighter liquidity caused by rate hikes, combined with elevated long-term Treasury yields, suppresses risk appetite and drives money into risk-free, high-yielding assets—long-term Treasuries.
Although U.S. bank stocks performed well this week, and ASML and TSMC reported strong earnings, the Q3 earnings season is only just getting started. At this stage, earnings can only show that the fundamentals behind the AI narrative have held up so far. There still aren’t enough reports for the market to know whether the entire industry is doing well.
In other words, in the short term, the AI fundamentals versus high long-term yields battle has temporarily been lost in an environment of elevated rate-hike expectations. The industry’s fundamentals are sound, but investors’ risk appetite has declined. Meanwhile, the possibility of rate hikes in December, Q1, or even later makes money more expensive. With Q3 earnings season only just beginning, investors lack confidence, so they naturally rotate into currently attractive, risk-free assets—U.S. Treasuries.
So the overall logic is simple: money flowing back into Treasuries pushes yields down. That leads to the strange short-term phenomenon of yields falling despite weak data, while U.S. stocks remain under pressure!
Another point is that after Treasuries were sold off repeatedly and 10-year and 30-year yields surged too quickly, they had already reached levels that offered investors a substantial margin of safety. Buying Treasuries now means getting yields high enough to offset inflation. Inflation is rising, so the Fed will inevitably raise rates—which means buying now still offers returns that are set to grow in the future!#沃什推动缩减前瞻指引和点阵图