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US inflation, dovish signals from the Federal Reserve and increased supply have driven US bond yields to rise sharply, and the market’s optimistic expectations that the selling pressure in the bond market has ended has sharply reversed.
us treasuryproduce It again increased rapidly. The 10-year government bond yield rose sharply by 24 basis points on Tuesday and Thursday (market closed on Wednesday) and reached 5.10%. It rose as high as 5.13% in the Asian session on Friday, dashing global government bond investors’ hopes that selling pressure on government bonds is over this year, and rekindling concerns about rising yields.
US inflation rate remained high in October, as wellfederal Reserve The “hateful” comments from (Fed) officials have led traders to expect the Fed to raise interest rates more aggressively, while an increase in the supply of government bonds also pushed yields strongly higher. What is more noteworthy is that although the U.S. is in sharesHuida Despite the turmoil generated by the event, selling pressure still persists in the government bond market, seriously damaging US debt’s status as a safe haven.
“This is a more serious market environment than the pandemic and the financial tsunami. At that time, the direction was very clear, but now we are facing persistent supply-side shocks and sharp interest rate fluctuations. We should still be cautious that yields may go higher this year,” said Wood, Australia manager of Schroeder Group.
It is not just short-term Treasuries that are sensitive to policy rates that have suffered losses this week. The two-year yield rose 29 basis points in two days, the largest since March 2023, and rose 38 basis points in the past week; The 10-year yield was the highest since April 2025.
The bond market has made a strong comeback throughout the week. Earlier, due to the Democratic victory in the US midterm elections, US technology stocks were in turmoil and money poured into government bonds. However, the bullish sentiment in the bond market quickly reversed due to a “sharp” speech by Waller, the Fed’s second director, who said a 2 cents increase in interest rates was possible at one point in December. The October Consumer Price Index (CPI) released on Tuesday increased more than expected, creating a bearish atmosphere in the market.
Rising US bond yields are impacting global bond markets. Bond market managers pointed out that the selling pressure on government bonds of developed countries has not yet ended, and the driving force of the selling pressure is still strong; The next target for the 10-year yield will be to reach 5.5%, and then may enter a consolidation phase. Market experts at Bloomberg Intelligence said there could be further selling pressure on 2-year Treasuries.
Some investors see rising yields as an opportunity. Hedge fund K2 Asset Management said when the 10-year yield rises to 5.3%, it will be an attractive buying opportunity for US debt, and it will continue to buy on rallies.
Outside the United States, Japanese and Australian government bond yields are rising toward multi-year highs, while French bond yields have also stopped falling and have risen again. Investors are betting that global monetary policy will tighten. The interest rate swap market currently expects the average interest rate among eight major economies to rise by more than 50 basis points (2 basis points) over the next year, compared to a 33 basis point (less than 2 basis points) increase a week ago.
Schroeder Manager Wood believes that interest rate trends will vary more across countries. They estimate that rising inflation and extremely strong economic growth could lead to US interest rates rising above 5%, but Australia and the European Central Bank could cut interest rates in 2027 to avoid an economic recession. He pointed out that “in 2027, economies of different countries will be in different stages of the business cycle, and it will be a very active year for bond managers.”
Summary FAQ
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The main reason is that inflation was still high in October and Fed officials issued more hawkish signals, leading the market to expect interest rates to be raised more aggressively. At the same time, an increase in the supply of government bonds pushed yields higher.
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Even though the Huida incident caused fluctuations in the US stock market, the flow of funds into US bonds did not recover significantly. Instead, the selloff in the government bond market continued, suggesting that the safe-haven appeal of US bonds has diminished significantly as risk increases.
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The interest rate swap market currently expects the average rate of interest rate increases in eight major economies to exceed 50 basis points next year, up from 33 basis points a week ago, indicating that global monetary policy may be tighter than previously expected.
