Treasury bond yields serve as a benchmark for overall social financing costs. Once yields rise, residential mortgage rates and corporate credit costs will increase accordingly, simultaneously exacerbating federal fiscal pressure—currently, US Treasury interest payments already exceed military spending. Many economists believe that this round of US interest rate increases is not a temporary disturbance but will become a core characteristic of economic performance for the remainder of this decade. Many past economic shocks have been short-term fluctuations. For example, businesses gradually adapt to tariff shocks, and the effects of geopolitical conflicts on oil prices subside as the situation calms down. However, this round of surges in long-term US Treasury yields to 25-year highs has led the mainstream market view to no longer consider it a temporary phenomenon that will disappear as inflation declines, but rather to conclude that high long-term bond yields will persist. I. Multiple Underlying Factors Jointly Push Up Yield Levels Since this summer, the resilience of economic growth, new inflationary pressures, and concerns about the long-term fiscal outlook of the United States have jointly pushed up bond yields. Many economists point out that the interplay of multiple factors has forced the market to reassess global investors' demand for US Treasuries; bond prices and yields move inversely, and weakening demand for Treasury bonds drives yields upward. The underlying logic of the fixed-income market and the macroeconomy has fundamentally changed. Even though the Federal Reserve has already completed a round of interest rate hikes, central bank actions to curb inflation remain lagging. Further interest rate hikes are needed to bring inflation to the target range, a judgment confirmed by the Fed's latest economic forecasts. According to the Federal Reserve's projections, the short-term policy rate, the federal funds rate, will exceed 4% this year and remain at this high level until 2027. Long-term Treasury yields largely anchor market expectations for the Fed's monetary policy over the next few years. Some economists predict that the 10-year Treasury yield could approach 6% next year and will likely remain above 5% throughout the 2020s. Even if market expectations for GDP growth and inflation do not change significantly, yields continue to rise. Behind this, oil prices are the main driver of short-term inflation, but the market anticipates that oil price pressures will gradually ease: the US benchmark crude oil price is expected to fall back to $88 per barrel by the end of the year and below $80 by July of the following year. Based on the assumption of falling oil prices, the market makes the following judgment on the inflation path: December CPI inflation at 3.5%, falling to 2.6% in June next year, and further decreasing to 2.3% by the end of 2027. The personal consumption expenditure price index, which the Fed focuses on, is expected to cool from 3.5% at the end of this year to 2.4% by the end of 2027. Besides inflation, two other long-term forces support high yields. First, the continued expansion of US government debt and the accumulating debt pressure keep investors wary. Second, large-scale construction of AI infrastructure will raise long-term economic growth expectations, while also creating huge capital demands, further pushing up funding costs. In this scenario, the 10-year US Treasury yield may remain around 5.2% in 2028, falling back to 5% by the end of 2029. High yields will significantly increase the burden on the federal budget. Previously, the Congressional Budget Office predicted that the 10-year US Treasury yield would not exceed 4.3% for the remainder of the decade, while the White House Office of Management and Budget was more optimistic, expecting the yield to fall to the mid-3% range by the end of the decade. However, current market yield expectations are already significantly higher than these two official baseline assumptions. II. Economic Fundamentals: Growth Resilience, Labor Market, and Recession Risks Authoritative surveys show that economists have raised their economic growth forecasts for this year, with the 2026 GDP growth forecast revised upward to 2.4%, up from 2.1% in July. The upward revision is mainly due to revisions to second-quarter economic data, while high-frequency data suggests that the annualized economic growth rate in the third quarter is likely to exceed 3%. However, the market does not believe that high growth can continue indefinitely. Most economists surveyed predict that after a short-term rebound, economic growth will decline again, with the remaining years of the decade expected to remain in the 2.1%–2.2% range. The labor market is generally expected to remain stable. By 2029, the unemployment rate is likely to fluctuate around 4.2%, roughly the same as the 4.2% level in September. The probability of a recession in the next 12 months is estimated at 24%, a slight downward revision from the 25% forecast in July, indicating that the risk of recession has not changed drastically. However, opinions are not entirely unified. Some economists question the robustness of the labor market, arguing that the employment fundamentals are more fragile than surface data suggests. Over the past six months, the US has added an average of 66,000 jobs per month, but the high-paying finance and technology sectors have seen few new jobs, highlighting concerns about the white-collar job market. This view holds that once the labor market weakens, the Federal Reserve's policy path will shift, initiating a rate-cutting cycle in the near future, thereby driving down bond yields. Once the Federal Reserve realizes that the labor market is less resilient than expected, its policy will shift towards easing. III. Midterm Elections: Fiscal Policy Expectations Lead to Divergence Between Inflation and Growth Economists also assessed the potential impact of next month's midterm elections on inflation and economic growth. Among the analysts participating in the assessment, nearly half believed that if Republicans continue to control both houses of Congress, the risk of upward inflation is highest; only 10% of respondents believed that a complete Democratic victory would push up inflation, while the remaining respondents believed that different parties controlling Congress would not lead to substantial differences in inflation. The core logic is that if Republicans continue to control Congress, there is a possibility of them working with the president to introduce a new round of tax cuts or expand fiscal spending, and fiscal expansion would support inflation. If Republicans achieve a landslide victory in Congress, there is room for further expansion of fiscal stimulus in the coming years. Regarding economic growth, opinions are also divided. A quarter of respondents believed that economic growth would be highest under Republican-controlled Congress; 13% believed that growth would be strongest when Democrats control Congress; another 19% believed that economic growth would be best if the Democrats won one of the houses of Congress but failed to control both; the remaining respondents believed that a change in congressional control would not significantly change the level of economic growth. IV. Summary: Market Divergence Remains, but High Yields Have Become the Baseline Scenario Overall, the baseline assessment of mainstream economists is that sticky inflation, the Federal Reserve's high-interest-rate policy, and the pressure of long-term US debt will jointly support US Treasury yields to remain at a higher level, preventing a rapid return to the low-interest-rate era of the past few years. However, the market has not reached a completely unified consensus. Those bullish on high yields focus on fiscal deficits, capital demand, and sticky inflation; the other side focuses on the potential weaknesses in the labor market, believing that once employment weakens, Fed rate cuts will break the high-yield environment and push long-term bond yields down. The direction of fiscal policy, especially Congress's fiscal arrangements after the midterm elections, will also be an important variable affecting the direction of inflation and yields. Economists predict that high bond yields will persist for a long time.