Cailianshe October 17th (Editor Xiaoxiang) With the 10-year US bond yield, known as the "anchor of global asset pricing ", the yield of US bond rose again on Friday, and in the US Treasury market with a scale of more than $23 trillion, the phenomenon of funds withdrawing and fleeing sharply again...
As of the close of last Friday, the yield of US bonds for each term generally closed up again: the 2-year US bond yield rose 3.3 basis points to 4.507%, the 3-year US bond yield rose 5 basis points to 4.504%, the 5-year US bond yield rose 6.7 basis points to 4.274%, the 10-year US bond yield rose 7.7 basis points to 4.026%, and the 30-year US bond yield rose 7.7 basis points to 3.998%.
Just looking at the quotes of US yields may seem too straightforward. In fact, how critical the current US bond market is, the following charts may be the most convincing:
According to statistics from JPMorgan Chase , the current
0-year US Treasury bond yield has risen by for 11 consecutive weeks, which is the longest upward trend since at least 1978. 
bond yield and price fluctuations are inverse relationship. This year is undoubtedly a historic "disaster year" for US bonds and even global bond markets. From the total return index, the 10-year U.S. Treasury bonds have fallen by 18.1% this year, and the losses are far more than any year since 1928.
Given that the U.S. stock market has fallen in parallel with U.S. Treasury bond prices this year, the most common 60/40 portfolio return rate of Wall Street has come to a shocking -21.6%, the worst year since the Great Depression in 1931.
The deep inversion of the US Treasury yield curve will always send signals that the US economy is about to fall into recession.
As of last Friday's closing, the inversion of the 2-year and 10-year U.S. Treasury yields are still close to about 50 basis points. Historically, this key U.S. Treasury yield curve has been one of the most reliable indicators to measure whether the U.S. economy will decline.
DoubleLine Capital Investment Grade Business Head Monica Erickson said, " Fed promises to further hike rate until they see inflation fall. The inversion of this 2-year/10-year curve is so deep that it tells people that even if the economy does not slow down severely, there will be a full recession," said
. The comparison below can be intuitively shown in each period. The increase in US Treasury yields, especially short-term US Treasury yields, over the year:
Note: The red line is the yield at the end of 2021, and the blue line is the current yield
At the end of last year, the 30-year US Treasury yield with the longest term and the highest yield was only 1.9%. Now, the 2-year US Treasury yield has reached about 4.5%, and the 10-year US Treasury yield has risen above 4%.
. Under the influence of the plummeting U.S. bond prices and sharp rise in yields, the global bond market has also experienced a bloodbath. is shown in the figure below. The benchmark 10-year Treasury bond yield of for major economies is at or close to the highest level of at least 52 weeks.
In the past week, the global bond market value has lost another $614.4 billion, and the bubble in the bond market is continuing to burst.
As long as the Federal Reserve does not turn, it will be difficult to stop the decline of US bonds?
At present, there is still no sign in the market that the decline in US bonds can be stopped in the short term. There will be no major economic data release in the coming week, which will not change the current speculation that the Fed will take more austerity measures.
Since the beginning of this year, the Federal Reserve has been raising interest rates at the fastest pace since the 1980s. Investors now see the possibility that the Fed will raise interest rates by 75 basis points in November and December after data released by the U.S. Department of Labor released last Thursday showing that both overall and core inflation rates exceeded expectations in September.
In the latest speech on the weekend, the "Eagle King" within the Federal Reserve and St. Louis Fed Chairman James Bullard did not rule out the possibility that the Federal Reserve would raise interest rates twice in November and December meetings, although it was too early to predict the issue now.
Brad said that from the perspective of macroeconomic , there is actually not much difference between additional interest rate hikes at the end of this year or the beginning of next year. But he has always supported the efforts to raise interest rates in the early stage of the cycle, first quickly raising interest rates to a level that curbs inflation, and then stay for a while for the economy to digest.
In fact, from Japanese pension funds and life insurance companies to overseas governments and commercial banks, these major buyers who used to rush to buy U.S. government bonds have now begun to back off, not to mention the Federal Reserve, which has been implementing quantitative tightening (QT) policies for months.
The Fed's own estimates show that if the current reduction rate is maintained, the total debt portfolio of its balance sheet may drop from the current $8 trillion to $5.9 trillion by mid-2025.
In the view of market observers, Before the arrival of stable new demand, more suffering from US debt may be ahead. This is also bad news for American taxpayers, and ultimately they have to pay for the rising borrowing costs. "With the central banks and banks generally exiting, we need to find a new marginal buyer for Treasury bonds, it's not clear who this will be, but we know they'll be much more sensitive to prices," said Glen Capelo, managing director of Mischler Financial. "Simply thinking that U.S. Treasury bonds will eventually find buyers to replace the Fed, foreign investors and banks is a dangerous idea.
Citigroup is concerned that the decline in foreign central bank holdings may trigger new turmoil, including when sudden market losses force investors to quickly close positions, resulting in the so-called risk value impact.
This article is from Cailianshe
