Download App

[Inflation and War Clouds Intertwine, Putting the US Treasury Market in a Dilemma] ⑴ After a surge on Thursday, US Treasury yields have stabilized, with market focus shifting from the hawkish tone of the Fed minutes to key data to be released soon. At 21:30 Beijing time on Tuesday, US personal consumption expenditure inflation data and the revised fourth-quarter GDP figure will be released. These two core indicators may reshape market expectations for the interest rate path. ⑵ The data-driven game is intensifying. If inflation and growth data fall short of expectations, it could reignite bets on interest rate cuts this year, thus suppressing yields. However, recent economic indicators generally point to resilience, meaning that strong data will further solidify policymakers' current stance of having virtually no intention of cutting rates, putting pressure on the bond market. ⑶ Meanwhile, geopolitical risks are pushing US Treasuries to a logical crossroads. Investors are preparing for possible US military action against Iran, creating a dual and contradictory market impact: on the one hand, rising risk aversion could trigger an influx of funds into US Treasuries, pushing down yields; on the other hand, concerns that rising oil prices could exacerbate inflation are pushing up yield expectations. Deutsche Bank analysis points out that US Treasuries are caught in a tug-of-war between safe-haven buying and inflation concerns. (4) As of Tuesday, Tradeweb data showed the 10-year US Treasury yield remained stable at 4.073%, a level reflecting a temporary balance in the market amidst a mix of bullish and bearish factors. Future trends will depend on whether the data reinforces the narrative of economic resilience or opens a window for interest rate cuts, and also on whether the situation in the Middle East evolves from a potential conflict into a substantial supply shock.