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2026-09-15 19:56:10
[US Treasury Outlook: Will the Stock-Bond Correlation Return?] ⑴ Ahead of major central bank meetings, medium-term government bonds led yields to multi-decade highs, potentially further complicating the situation. ⑵ A sell-off in the bond market, led by Japanese government bonds, resumed, pushing Japanese government bond yields to multi-decade highs, while the yield on the 10-year US Treasury bond rose to its highest level since 2007. ⑶ The Federal Reserve and the Bank of Japan will announce their interest rate decisions on Wednesday and Friday, respectively, with the market expecting both to raise rates by 25 basis points. ⑷ Japan's ruling party and prime minister finalized a consumption tax cut and household subsidy outline without specifying the source of funding; the finance minister stated that funds would be raised by reviewing expenditures and income. ⑸ Japanese government bonds did not respond favorably, with 20-year and 30-year yields rising by 7 and 8.5 basis points respectively, and the 10-year yield briefly touching a 30-year high of 3.035%. ⑹ The yen weakened 0.3% against the dollar to 154.81. (7) The US Treasury Secretary announced an increase in repurchases of 10- to 30-year Treasury bonds for the remainder of the quarter, and news also emerged that the UK would stop selling long-term bonds. Europe faces financing difficulties for defense and infrastructure spending. (8) The Norwegian central bank had previously announced a reduction in its bond allocation from 70% to 50%, prompting long-term bond investors to reconsider. (9) Bonds traditionally function as a risk diversification tool due to their negative correlation with stocks, but recent high yields have impacted growth stocks, and the simultaneous decline in both stocks and bonds has worsened portfolio performance. (10) If recent performance is not only related to inflation but also involves concerns about debt sustainability, the correlation between stocks and bonds may converge. However, if high interest rates trigger a recession and force central banks to cut rates, the certainty of this scenario will decrease. (11) Questioning the role of bonds as a risk diversification tool is reasonable, while inflation-protected bonds, short-duration bonds, and other assets should also be considered. 12 On that day, the long-term yield of US Treasury bonds rose by 2 to 5 basis points, while the 10-year yield fluctuated between 4.98% and 5.04%. Tactically, the preference is to buy duration when the 10-year yield reaches 5% or above.
