The yield on the U.S. 30-year Treasury bond closed at approximately 5.59%, briefly surpassing 5.61% during the day, marking the highest level since 2002. Long-term bonds have risen for several consecutive days, with the 10-year yield reaching around 5.24% to 5.29%.

Factors driving this include high energy prices, persistent inflation, fiscal deficits, and long-term bond supply, as well as corporate bond issuance diverting buying interest. In August, a $25 billion 30-year auction had a yield of 5.216%, the highest auction rate since 2001; thereafter, the secondary market continued to rise. The reversal of yen carry trades has also been cited as amplifying global long-end selling pressure.

Long-end rates directly raise the cost of mortgage and corporate bond financing. The market is focused on whether the 10-year yield can stabilize above 5.5%, necessitating a reevaluation of valuation models. U.S. Treasury prices and yields move inversely, and September has seen long-term bonds approaching one of the worst months in recent years. Stocks were pressured on the day, with the energy sector dragging down major indices.

On the supply side, the Treasury continues to issue long-term bonds to fill the deficit, alongside technology and industrial companies issuing bonds for capital expenditures. On the demand side, traditional buyers' absorption capacity has declined, and term premiums are being repriced. The Federal Reserve's policy path is becoming more difficult to shift towards easing due to inflation and oil prices, leading traders to raise the probability of another rate hike this year.

Mechanically, this is a repricing of rates rather than a single corporate event. Sellers are global funds and carry trades reducing their long-term Treasury holdings, while buyers are investors requiring higher compensation to take on deficits and supply. Funds are flowing from bond prices to higher coupon rates, putting pressure on long-term funds and sectors reliant on low rates, while short-term cash and floating-rate products benefit relatively. The event-driven factors stem from the resonance of inflation and supply, not a single day's data surprise.

Source: Public Information