With the Federal Reserve reiterating that interest rates will continue to be maintained at a high level, long-term US Treasury yields are still rising, putting pressure on risk assets.
After the release of the overnight Federal Reserve minutes, the 10-year US Treasury yield soared, breaking through 4.281% during the session, the highest closing yield since June 2008.
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US Treasury yields rose across the board, with the 30-year Treasury yield reaching its highest level since October 22, 1999, and the 2-year Treasury yield surging to 5.00%.
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As the &#34;anchor of global asset pricing,&#34; the surge in the 10-year US Treasury yield has further dragged down risk assets. US stocks also fell again last night: the Dow Jones Industrial Average fell 180 points to a four-week low, the S&amp;P 500 index approached 4400 points, and both the Russell small-cap stocks and the Nasdaq hit their lowest levels in over five weeks and seven weeks, respectively, since July 7 and June 26.
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The minutes of the 7th FOMC meeting released by the Federal Reserve yesterday showed that most officials believe that inflation still faces &#34;significant upward risks, which may require further tightening of monetary policy,&#34; intensifying investors' concerns about rates remaining at high levels for a longer period of time.
At the same time, the US Treasury announced this month that it will borrow more funds than expected in the coming months to fill the fiscal gap, forcing investors to buy more bonds than expected, further pushing up long-term US Treasury yields.
Long-term bond yields usually reflect investors' expectations of the average level of short-term interest rates set by the Federal Reserve during the bond's term, and are also influenced by investors' views on the market and the global economic health.
As the 10-year US Treasury yield is still far below the level of short-term interest rates set by the Federal Reserve, some analysts believe that there is still enough room for the 10-year US Treasury yield to continue to rise, which could lead to &#34;unexpected chaos&#34; as investors are forced to close positions based on expectations of declining yields.
On the other hand, if investors hold US Treasury bonds to maturity, they can provide investors with more attractive risk-free returns, thereby reducing the attractiveness of risk assets.
Penn Mutual Asset Management portfolio manager Zhiwei Ren said:
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When investors start demanding higher long-term bond yields to compensate for inflation risks, the prices of risk assets will decline. I believe this is what the market is currently concerned about.
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Currently, traders believe that there is an 86.5% chance that the Federal Reserve will maintain interest rates at the next September FOMC meeting, indicating that most market participants have reached a consensus that the Fed's tightening cycle is nearing its end.
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However, their expectations for when interest rates will start to decline vary. Some investors have abandoned their bets on the US heading towards a recession in the next 6 to 12 months due to a series of economic data.
Tony Roth, Chief Investment Officer at Wilmington Trust, said:
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We believe that the economic growth is quite strong and expect a soft landing.
Having said that, the price-to-earnings ratio is high, and we must assess the attractiveness of stocks relative to bonds.
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Some analysts believe that there is still enough room for the yield on 10-year US Treasury bonds to continue to rise, which could lead to "unexpected chaos".

"The 'Anchor of Global Asset Pricing' puts pressure on the whole market! The ten-year US Treasury yield reaches its highest level since 2008."