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[Global Bond Markets Under Pressure Ahead of Fed Decision] ⑴ Global bond markets experienced a sharp sell-off ahead of the Fed's interest rate decision, with yields on major maturities hitting multi-year highs. ⑵ On Tuesday, the benchmark 10-year US Treasury yield rose to approximately 5.05%, a new high since 2007; the 2-year yield reached its highest level since 2024; and the 30-year yield reached approximately 5.37%, also a near-decade-long record. ⑶ Global bond markets were under pressure simultaneously. The yield on Japanese 10-year government bonds rose to approximately 3.03%, the highest since September 1996; the German 10-year yield rose to approximately 3.57%; and the UK 10-year yield reached approximately 5.42%, while the 30-year yield reached approximately 5.94%, a new high since 1998. ⑷ Market positioning is even more alarming. A JPMorgan survey showed that the proportion of clients holding short positions jumped by approximately 10 percentage points to approximately 19% in a single week, the largest weekly increase since 2019, while neutral positions fell from approximately 56% to approximately 48%. (5) In the past week, spot market traders increased their short positions at the fastest pace since the beginning of 2025, with Citi strategists stating that short positions are tactically extreme. (6) Behind this extreme betting is a resonance of three narratives: August CPI rose by about 0.4% month-on-month, core CPI rose by about 0.3% month-on-month, higher than expected, and housing, communication, and transportation service prices accelerated, indicating that inflationary pressures are spreading from goods to services. (7) Escalating geopolitical conflicts in the Middle East pushed up oil prices, with the NYMEX WTI crude oil futures main contract breaking through about $106 per barrel at one point during the session, setting a new high for the period. (8) Fiscal supply pressures have not eased, with US federal debt exceeding about $40 trillion. Investments in data centers, chips, and infrastructure brought about by the expansion of the artificial intelligence industry also need to be financed through the bond market, further increasing funding needs. (9) The market is close to pricing in a September rate hike, with interest rate swaps indicating that the Fed will tighten by about 50 basis points for the remainder of the year, and the probability of a 25 basis point rate hike at the September meeting is over 90%. (10) The real battle lies in the Fed's updated interest rate forecasts and statement wording. Institutions suggest confirming whether it's a hawkish or dovish rate hike. The Bank of Japan's rate hike may transmit to global asset prices through carry trades. The Middle East situation and rapid short-term oil price increases could also disrupt inflation and monetary policy expectations. (11) Overall, short-selling pressure is itself a risk; any discrepancy in expectations could trigger a sharp reversal. Market sentiment is cautious. Future focus will be on the Fed's policy path, the Bank of Japan's actions, and the evolution of the geopolitical situation.