Multiple factors bring fluctuations to the US financial market

Recently, the recent developments in the US financial sector have been particularly noteworthy. The non farm payroll report and Powell's speech have triggered significant fluctuations in US bond yields, while the continued decline of the US dollar index, as well as the upcoming vote in the US House of Representatives on the "Continuing Resolution" temporary spending bill, have added strong uncertainty to the US and even global financial markets.

The non farm payroll report, as a key barometer of the health of the US economy, quickly caused waves in the US bond market after its recent release. At 21:31 Beijing time on Friday, just after the report was released, the yield of the US 10-year treasury bond bonds rebounded strongly from 4.23% to 4.2820%. This rapid rise reflected the initial optimistic interpretation of the data by the market, which seemed to see the dawn of improving economic prospects. The capital was attracted to flow to risky assets, causing the price of US bonds to fall and the yield to rise. However, the enthusiasm of the market did not last long. Just a moment later, the yield of 10-year treasury bond rose and fell back, down about 6 basis points, and the refresh date was below 4.21%. This sharp reversal implies that there are complex factors hidden behind the data, such as employment structure, sustainability of wage growth, and other issues, prompting investors to re-examine their investment strategies and capital to flow back into the US Treasury market, driving down yields. The two-year US Treasury yield also fluctuated violently, dropping to 3.9002% at one point when non farm payroll data was released, then quickly rebounded to 3.9748%, and then fell about 6 basis points to below 3.90%. The significant fluctuations in short-term US bond yields highlight the market's high sensitivity to short-term economic conditions and monetary policy expectations. Investors continuously adjust their expectations for the future policy path of the Federal Reserve based on data, thereby influencing their buying and selling decisions on short-term US bonds.

And Fed Chairman Powell's speech, like a giant rock thrown into a calm lake, further stirred up the US bond market. At 1:30 am after the release of non farm payroll data, Powell bluntly stated that "there is no urgent action", which instantly changed the direction of the market. Previously, after the release of non farm payroll data, the two-year US Treasury yield fluctuated between 3.9% and 3.98%. After Powell's speech, the yield quickly rose from the 3.9% line to above 4.02%. Powell's cautious monetary policy attitude has eased market concerns about the Federal Reserve's significant interest rate adjustment in the short term, prompting some funds to flow out of risky assets and into the US bond market, further driving up US bond yields. This week, the yield of benchmark 10-year treasury bond rose 9.29 basis points to 4.3011%; The two-year US Treasury yield rose by 1.29 basis points to 3.9997%.

At the same time, the US dollar index has also fallen into a slump. Recently, the US dollar index hit a new four month low, with a weekly decline of over 3%, marking the largest weekly decline in over two years. The weakening of the US dollar is closely related to the uncertainty of the growth prospects of the US economy. The constantly changing tariff policies have intensified market anxiety and shaken investors' confidence in US economic growth. Previously, the market generally believed that tariff policies would push up US inflation and support the strengthening of the US dollar. However, the reality is that the volatility of tariff policies not only failed to achieve the expected effect, but also exacerbated the risk of economic recession. According to calculations by the Boston Fed, if tariffs are fully implemented, core inflation in the United States will increase by an additional 0.8 percentage points, while economic growth may decline by 1.2%. This situation has led to a sharp increase in expectations for the Federal Reserve to cut interest rates. The market is betting that the rate of interest rate cuts will expand from 36 basis points to 50 basis points within the year, greatly weakening the attractiveness of US dollar assets and driving the US dollar index to continue to decline.

What makes the market even more nervous is that the US House of Representatives will vote on the "Continuing Resolution" temporary spending bill as early as Tuesday this week, which is seen by the market as a potential "US market thunderbolt". If the bill fails to pass smoothly, the US federal government may face the risk of partial shutdown, which will have a direct and negative impact on the operation of the US economy. During the government shutdown, the operations of numerous federal agencies will come to a standstill, the release of economic data may be delayed, public services may be restricted, consumer and business confidence will be undermined, and financial market stability will be impacted. Even if the bill is ultimately passed, the intense game and uncertainty in the process will exacerbate market volatility. Investors will closely monitor the voting progress and adjust their investment portfolios based on the results, which will undoubtedly bring more variables to the already volatile financial market.

In the future, with the release of more economic data, further adjustments to Federal Reserve policies, and the implementation of fiscal policies, the trend of the US financial market will still be full of variables, and global investors will continue to maintain a high level of attention and cautiously respond to potential risks and opportunities.