US Treasury yield fluctuations intensify: Fed rate cut expectations vs Bank of Japan rate hike signals

Source: BlockMedia Original Title: [뉴욕채권] US Treasury Yields Fluctuate… Market Mixed Between Fed Cuts vs Japan Hikes Original Link: The yield on the 10-year U.S. Treasury bond slightly fell after exceeding 4.1% in the previous trading day, fluctuating around the level of 4.08%. Against the backdrop of the Bank of Japan's interest rate hike hints impacting the global bond market, domestic expectations for rate cuts in the U.S. intertwine with the rebound of risk assets, resulting in a mixed trend within the bond market.

The yield on the 10-year U.S. Treasury bond fell by 0.002 percentage points from the previous trading day, reporting at 4.088%. During the previous trading day, it had risen to 4.115%, setting a new short-term high, but the increase was later digested as expectations for interest rate cuts re-emerged.

The fluctuations in yields this time are largely influenced by the potential changes in the Bank of Japan's policy. Bank of Japan Governor Kazuo Ueda mentioned that the issue of interest rate hikes might be discussed at the next policy meeting, which led to a sharp rise in Japanese government bond yields, creating a tense atmosphere in the global bond market. In particular, the possibility that Japanese investors' funds may flow back from U.S. Treasuries to domestic Japanese bonds has been raised, putting pressure on the demand for U.S. Treasuries.

However, the expectation of a rate cut by the U.S. Federal Reserve remains valid. Against the backdrop of signs of weakness in the U.S. labor market and poor manufacturing data, the market has reflected in the futures market an 87% probability that the Federal Reserve will lower the benchmark interest rate by 25 basis points at the December meeting. This has become a factor limiting further increases in Treasury yields.

At the same time, there is a partial recovery in the risk asset preference mentality, and bond demand has weakened. Recently, the cryptocurrencies and AI-related stocks that were adjusted due to overheating concerns have rebounded, showing signs of changes in investors' portfolios. This puts pressure on yields.

Participants in the U.S. Treasury bond market are paying attention to the prospects of monetary policy shifts in Japan and major European countries, as well as the Federal Reserve's final decisions, expecting to seek clearer direction through the upcoming non-farm payroll data and price data.