On Tuesday, September 1st, the global fixed-income market was undergoing a sustained period of adjustment. Long-term government bond yields generally rose, with market focus shifting from short-term interest rate changes to fiscal sustainability, government financing needs, and the repricing of inflation expectations. The yield on the 30-year US Treasury bond has repeatedly remained above 5% this year, closing above this level for 55 consecutive trading days so far, marking the longest such streak since 2006; in mid-August, the yield rose to 5.34%, reaching its highest level since 2007. Meanwhile, the global bond market is not experiencing isolated fluctuations. The yield on the 10-year Japanese government bond touched 3%, reaching its highest level since 1996; UK long-term government bond yields also rose to multi-year highs, reflecting investors reassessing the fiscal pressures and inflation risks in major economies. The core market concern has gradually shifted from "whether interest rates will fall" to "whether long-term funding costs will remain high." For asset allocation, changes in the bond market are impacting stock valuations, corporate financing costs, and the structure of global capital flows.

US long-term bonds under pressure: Fiscal deficit becomes a key variable for market focus.

The persistently high yields on long-term US Treasury bonds are primarily driven by fiscal supply pressures, debt growth, and market repricing of future financing needs. In recent years, the US government debt has continued to expand, making the fiscal deficit a key indicator for the bond market. When the government needs to issue more bonds to meet financing demands, the market typically demands higher yields to absorb the increased supply. Longer-duration bonds are more sensitive to interest rate changes, making the 30-year Treasury yield a significant indicator of market sentiment. High yields, in turn, increase the pressure on government debt interest payments, creating a cyclical effect between fiscal policy and interest rates. The market is not only focused on current interest rate levels but, more importantly, on whether the fiscal path can remain stable over the next few years. The US Treasury has recently attempted to improve liquidity in the long-term bond market through bond buybacks, but market reactions indicate that purely technical operations cannot completely alter the trend of long-term funding costs. US Treasury Secretary Scott Bessant has stated that the US bond market is resilient and believes that US Treasuries remain one of the world's most important fixed-income assets. However, bond investors are more concerned about long-term supply and demand dynamics and changes in the fiscal structure.

Global yields rise in tandem: Inflationary pressures are once again influencing monetary policy expectations.

This round of bond market adjustments is not limited to the US; major global bond markets are experiencing synchronized changes. The changes in the Japanese bond market are particularly noteworthy. The yield on 10-year Japanese government bonds rose to 3%, a significant shift after the end of a prolonged period of low interest rates in the Japanese bond market. Market concerns about inflationary pressures, fiscal spending, and the pace of monetary policy adjustments are driving long-term yields further upward. The European market faces similar pressures. Recent rebounds in Eurozone inflation data have led the market to reassess the European Central Bank's future policy space. Simultaneously, rising energy prices have increased the risk of imported inflation, raising investors' expectations for persistently high long-term interest rates. From an asset pricing perspective, rising bond yields imply a repricing of the risk-free rate. When the cost of long-term funding increases, overvalued assets typically face pressure to adjust their valuation models. The market needs to observe whether the yield changes stem from improved economic growth or from fiscal risks and inflationary pressures. If the latter dominates, market focus will shift more towards the balance between fiscal discipline, government financing needs, and central bank policies.

AI Investment and Corporate Financing Needs: The Bond Market Faces New Supply Pressure

Besides government debt expansion, corporate financing needs are also a significant factor influencing the long-term bond market. In recent years, investment in artificial intelligence infrastructure has grown rapidly, leading large technology companies to increase capital expenditures and raise funds through the bond market. Increased corporate bond issuance further expands the supply in the fixed-income market, requiring investors to have more funds to absorb the new bonds. A new competitive relationship is emerging in the market: governments need to issue bonds, companies need to issue bonds, but investors have limited funds. When bond supply increases rapidly, yields may need to rise to attract more capital allocation. This change means that the factors influencing long-term interest rates have become more complex. In the past, the market mainly focused on central bank policies; now it also needs to consider government fiscal needs, corporate capital expenditure cycles, and changes in global capital flows. The focus of technical observation is shifting towards trend persistence, volatility structure, and the changing relationship between yields of different maturities. Changes in the yield curve reflect the market's comprehensive judgment on the future economic, inflation, and policy paths, but a single indicator cannot represent the entire market direction.