Us bonds set off a fierce selling wave! Fed rate cut uncertainty increases!

Recently, the Federal Reserve's interest rate cut expectations encountered a "Waterloo" - the market experienced a fierce wave of US bond selling. Former Federal Reserve governor Kevin Warsh blasted the central bank in an interview, arguing that its policy of cutting interest rates deviated from previous statements, while U.S. Treasury yields surged to multi-month highs, spooking global markets. In the context of the Fed's interest rate reduction expectations, short - to long-term US bond yields have risen across the board, and the 10-year US bond yield has climbed to its highest point since July this year. Behind this rally is the Fed's increased uncertainty about interest rate cuts and strong employment data supported by the argument not to cut rates.

As the US Treasury is an important bellwether of the global financial market, the selling tide of the US Treasury market has not only had an impact on the US market, but also caused a small impact on the global market. First, the impact on the US financial market, due to the uncertainty of the Federal Reserve's interest rate cut path, investors on the Federal Reserve's future interest rate cut expectations began to cool, leading to a wave of selling in the US bond market. The sell-off caused Treasury prices to fall and yields to rise. This reflects market uncertainty about the future of the U.S. economy and concerns about changes in Federal Reserve policy. Since Treasuries are one of the main sources of funding for the U.S. government, the sell-off has caused yields to rise, which in turn increases the government's funding costs. This could have negative implications for the US fiscal position. Because Treasuries are seen as a safe-haven asset, their sell-off could cause investors to move into other assets, such as stocks, triggering short-term volatility in equities. However, this volatility can also be influenced by a variety of other factors, such as economic data, corporate earnings, etc.

The second is the impact on the global financial market, the US Treasury is an important bellwether of the global bond market, and its selling tide may trigger volatility in the global bond market. Bond yields in other countries are also likely to rise in response to higher U.S. yields, raising global funding costs. A wave of U.S. bond selling could lead to fluctuations in the dollar's exchange rate. The Fed, while lowering policy rates to provide more accommodation, is still modestly tightening its balance sheet, which has tightened financial conditions somewhat. This ambivalence in monetary policy adds to market uncertainty. Because US Treasuries are one of the world's most important reserve assets, their sell-off could trigger a shake-up in confidence in the dollar, which could lead to a fall in the currency's value. A sell-off in U.S. debt could exacerbate risks in emerging markets. As emerging markets are generally more sensitive to global financial market volatility, a sell-off in the U.S. Treasury market could trigger capital outflows and financial market volatility, posing a threat to economic and financial stability in emerging markets.

The third is the impact on the Federal Reserve and the global economy, the tide of selling US Treasuries may lead to changes in the market's expectations of the Federal Reserve's interest rate cut. At the same time, a wave of U.S. bond selling may make it more difficult for the Federal Reserve to set policy. Because of the uncertainty in market expectations for Fed policy, this could lead to greater challenges for the Fed in setting policy. The Fed needs to make trade-offs and decisions that balance economic growth, inflation control, and financial market stability. The US bond sell-off could trigger a deterioration in the global trade and investment environment. As a result of fluctuations in the exchange rate of the US dollar and volatility in the global financial markets, the investment and trade activities of multinational enterprises may be negatively affected, which in turn has an adverse impact on global economic growth. The sell-off could exacerbate risks to global financial stability. Due to the close connection and mutual influence among the global financial markets, the selling wave of the US Treasury market may trigger turbulence and instability in the global financial market, which in turn poses a threat to global financial stability. Going forward, if the Fed can clarify its rate cut path and give clear policy signals, it will help stabilize market sentiment and reduce selling pressure.

In summary, the impact of the violent sell-off in US Treasuries is multifaceted, complex and far-reaching. The prospect of a Fed rate cut is now in doubt, and for global investors, the bond market volatility means a reassessment of portfolios, especially allocations to US Treasuries. Analysts suggest that investors should focus on the Fed's next move and actively adjust their portfolios to deal with the attendant risks.