In recent times, the US Treasury market has been under pressure, with the benchmark 10-year US bond yield rising above 5% on September 14 (Monday) and further increasing to over 5.021% on September 15 (Tuesday), reaching the highest level since 2007. The rising yield is increasing the overall financing costs in the US and prompting a reevaluation of the Federal Reserve’s monetary policy and the fiscal situation in the US.
According to reports from Reuters, on September 14, the benchmark 10-year US bond yield rose above 5%, surpassing the high point since October 2023. On September 15, it increased further to over 5.021%, hitting the highest level since the middle of 2007. The yield was around 4.15% at the beginning of the year, briefly dropping below 4% in February before steadily rising.
At the same time, the 30-year US bond yield rose to around 5.35% on the 15th, reaching a high point in nearly 20 years. The persistent high long-term bond yields reflect investors’ concerns about future inflation, interest rates, and the US fiscal deficit, which continue to escalate.
The recent significant rise in oil prices has intensified market concerns about inflation. During the Asian trading session on the 15th, US crude oil futures rose by 1.82% to $103.24 per barrel, while Brent crude oil rose by 1.6% to $107.37 per barrel. The surge in oil prices has reignited worries about inflation in the market, leading investors to raise their expectations of the Federal Reserve further tightening its monetary policy.
The market is currently closely watching the Federal Reserve’s monetary policy meeting on September 15-16. Since Federal Reserve Chairman Kevin Warsh hinted at a hawkish signal at the Jackson Hole Symposium, expectations for a rate hike by the Federal Reserve have significantly increased. A survey of economists released by Reuters on September 14 showed that about 85% of the surveyed economists expect the Federal Reserve to raise interest rates by 25 basis points.
In addition to rate expectations, the expanding US fiscal deficit and increased bond issuance have added pressure on bond market supply. The total US federal government debt surpassed $40 trillion for the first time in August, reaching around $40.10 trillion as of September 3. Meanwhile, large tech companies are engaging in large-scale financing for AI infrastructure construction, further increasing corporate bond supply, competing for market funds with US Treasury bonds, and adding upward pressure on long-term bond yields.
As a key pricing benchmark in global financial markets, the rise in the 10-year US bond yield may further elevate financing costs for households and businesses, putting pressure on the real economy.
The impact on the housing market is particularly evident. Yahoo Finance reported that the average interest rate for a 30-year fixed-rate mortgage in the US rose to 6.76% last week, higher than the 6.15% rate at the beginning of the year. Analysts warn that if yields continue to remain high, consumers’ credit consumption and businesses’ borrowing costs could face further pressure.
For the stock market, the higher yields on US bonds have increased the attractiveness of low-risk assets, potentially exerting temporary pressure on overvalued tech stocks and growth stocks. However, strong corporate earnings so far this year have somewhat cushioned the impact of the bond market turmoil.
The rise in US bond yields is not an isolated phenomenon. The 10-year government bond yields in Australia and the UK have also surpassed 5%, while the long-term bond yields in Germany, France, and the UK have all reached multi-year highs.
Japan’s 10-year government bond yields touched 3% for the first time on September 1, surpassing highs since September 1996; it then fell momentarily before rising further to 3.025% on September 15, hitting about a 30-year high.
Furthermore, market observers believe that the increase in Japanese interest rates and the strengthening of the yen may reduce the attractiveness of the “yen carry trade.” If investors reduce trades borrowing the low-interest yen to invest in high-yield assets overseas, it could further impact the global bond market.