Key Transaction Data: The Fed is Losing Rate Control, 30-Year Treasury Yield Rises to 5%
BlockBeats News, September 2nd, The Kobeissi Letter released its latest market analysis stating that the Federal Reserve will cut interest rates for the first time in 2025 within 15 days, but the 30-year U.S. Treasury bond yield is currently approaching 5.00%. As the market digests the impact of the Fed's rate cut, interest rates are rising. Currently, there is a 90% probability of the Fed cutting rates by 25 basis points on September 17th, and the market expects a 50 basis point rate cut in 2025, with a possibility of a total of 75 basis points cut this year even as high as 34%.
However, today the U.S. Treasury bond yield has surged, with the 30-year bond yield rebounding to 5%, a level equal to that of the 2008 U.S. financial crisis. As the market prepares for a rate cut, interest rates are actually rising. The U.S. deficit spending has spun out of control, and the Fed is losing control over interest rates, having issued over $200 billion in bonds in just five weeks. We are at a stage where investors are simply unwilling to buy U.S. government bonds at the current yield.
The "term premium" on U.S. 10-year government bonds is the additional yield demanded by investors holding long-term bonds, usually due to the "perceived risk" of holding these bonds, and has now reached close to its highest level since 2014. Meanwhile, with just two weeks left until the rate cut, the U.S. core inflation rate has risen to over 3% and is on an upward trend. With an annual inflation rate of 3%, the dollar will lose over 25% of its purchasing power in the next 10 years. Since 2020, it has already lost around 25%, and the inflation rate continues to rise. In two weeks, the Fed will cut rates and "blame" it on the weak labor market. The unemployment rate for young Americans aged 16 to 24 is as high as 10%, the labor market is soft, inflation is rising, and stagflation has arrived.
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