Inflation risks and a strong labor market surge as the Fed raises interest rates and U.S. bond prices fall for four consecutive days
Affected by the continued rise in international crude oil prices and the strong performance of the U.S. labor market, U.S. Treasury bond prices fell for the fourth consecutive trading day on the 23rd, and Treasury bond yields of all maturities generally climbed to their highest levels since the beginning of 2025. The capital market's bets on the Federal Reserve's resumption of monetary tightening policy have increased significantly, with traders generally expecting the Federal Reserve to announce an interest rate hike as soon as possible at its recent regular meeting. Secondary market trading data shows that as of late afternoon on the 23rd Eastern Time, the 2-year U.S. bond yield rose 5.1 basis points to 4.3491%; the 5-year U.S. bond yield rose 5 basis points to 4.4539%; the 10-year U.S. bond yield rose 4.3 basis points to 4.6972%; and the 30-year U.S. bond yield rose 2.2 basis points to 5.1669%. Among them, the 2- to 10-year U.S. bond yields once reached their highest point since the first quarter of 2025. Analysts pointed out that a rebound in oil prices triggered by geopolitical conflicts and unexpectedly strong employment data were the main driving forces for pushing up Treasury yields. Data released by the U.S. Department of Labor that day showed that the number of people applying for unemployment benefits for the first time last week fell to a half-century low, indicating the resilience of the labor market and further pushing up the market's inflation expectations. Affected by this, the interest rate derivatives market has shifted significantly in pricing the Fed's monetary policy path. Traders have significantly increased their bets on the Federal Reserve's future interest rate hikes. The market is currently pricing in that the Federal Reserve may implement at least two interest rate hikes of 25 basis points each before mid-2027. For the upcoming monetary policy meeting, the market expects that the probability of tightening measures has increased significantly. In addition, the auction demand for the 10-year U.S. Treasury Inflation-Protected Securities (TIPS) issued that day was lower than expected, and the winning bid yield was higher than the pre-issuance trading level, reflecting pressure on the secondary market's willingness to take on U.S. debt assets. The large capital flows in the options market also indicate that some institutional investors are increasing their hedging arrangements against increased market volatility in the future. Open a futures account on Sina's cooperative platform, safe, fast and guaranteed