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2025-12-12 20:38:21
[US Treasury "Bear Steepening" Storm Strikes, Global Bond Market Pressure Transmitted to Wall Street] ⑴ The US Treasury market experienced a significant "bear steepening" overnight, with long-term yields jumping 3-4 basis points in the absence of major news. This sell-off was primarily driven by two factors, reinforced by several secondary factors. ⑵ The primary driver was post-auction position distribution trading. After absorbing $39 billion in 10-year and $22 billion in 30-year Treasury supply, investors (including many institutions) chose to take profits on long positions after the recent rise, exacerbating selling pressure. ⑶ Secondly, the market is hedging and positioning for next week's data deluge, including the November jobs report, CPI data, and more long-term Treasury issuances. This could be one of the last few important trading days for high-grade bond issuances before the end of the year. ⑷ Among the secondary factors, pressure in the global bond market was the biggest driver, adding a term premium to US long-term Treasury bonds. The Japanese government bond market is the biggest concern, as its investors hold over $1 trillion in US Treasury bonds and MBS. The yield on 30-year Japanese government bonds has fallen 10 basis points from its recent high. (5) Media reports reveal the transmission logic of pressure in the global bond market: rising yields in other major economies may spill over into the US market, attracting funds away from US Treasuries. If Japanese government bond yields continue to climb, it could put pressure on the long end of all markets (including the US). (6) Another focus is the interaction between US domestic politics and the central bank. Media reports detailed the process by which the Federal Reserve Board unanimously voted to re-elect regional Fed presidents. This usually low-key administrative process has received unusual attention this year due to related pressures, raising concerns about the central bank's independence. (7) Today, the market will focus on speeches by three Fed officials, particularly the comments from Chicago Fed President Goolsby, a hawkish dissident who held a hawkish stance at Wednesday's meeting. Interestingly, he was one of the most dovish members of the Federal Open Market Committee before the election.
