US Treasury Market Volatility Rises, Long-Term Yield Pressure May Affect Stock Market

The US Treasury market has recently shown signs of tension, with long-term yields in the approximately $30 trillion market rising rapidly and volatility increasing. There are concerns that pressure in the bond market may transmit to risk assets such as stocks. Data shows that in the last week of July, the yield on 30-year US Treasuries reached its highest level since 2007, while the yield on 10-year US Treasuries also broke through its trading range of the past two years. The market believes that the rise in yields reflects investors reassessing the Federal Reserve's commitment to combating inflation. Recently, there have been divisions within the Federal Reserve, with three regional Fed presidents voting in favor of interest rate hikes, raising concerns about uncertainty regarding future interest rate paths. As bond market volatility increases, the MOVE index, which measures Treasury volatility, has risen to its highest level since May, and demand for put options related to long-term Treasury ETFs has significantly increased, with traders using the options market to hedge risks in advance. Analysts point out that persistently high US Treasury yields may increase global financing costs and put pressure on stock market valuations. Bob Elliott, Chief Investment Officer of Unlimited Funds, stated that it is difficult for the market to determine how long the stock market can sustain itself at current interest rate levels. Additionally, the recent joint intervention by the US and Japan in the yen has also raised concerns about the stability of US Treasuries. In the future, the market will focus on the US Treasury's financing plans, economic data, and the July non-farm payroll report, with the core issue being whether the Federal Reserve will continue to maintain a tightening stance and whether long-term yield pressures will spread to risk assets.