Soaring US Treasury Yields... 10-Year Bond Surpasses 4.8%, Soon to Reach 5%

The U.S. Treasury yields are showing an unstoppable upward trend amid the Federal Reserve's (Fed) announcement of prolonged high interest rates. The 10-year U.S. Treasury yield, which serves as a benchmark for global bond yields, surpassed 4.8%, marking a new high since 2007. There are also expectations that it will soon reach the 5% range.

On the 3rd (local time), as of 4 p.m. in the New York bond market, the 10-year yield was trading around 4.80%, up more than 11 basis points (1bp = 0.01 percentage points) from the previous session. This is the highest level since August 2007. The 30-year yield also rose to 4.93%, approaching the 5% mark. The 2-year yield, which is sensitive to monetary policy, climbed to around 5.15%.

This rise in Treasury yields reflects growing expectations that the Fed's high interest rate stance may last longer than initially anticipated. The employment data released that day also confirmed the robustness of the U.S. economy, further pushing up Treasury yields. According to the Job Openings and Labor Turnover Survey (JOLTs) released by the U.S. Department of Labor, the number of job openings in the private sector in August increased by 690,000 from the previous month to 9.61 million. This far exceeded the Dow Jones estimate of 8.8 million, adding weight to the expectation of prolonged Fed tightening.

Accordingly, there are forecasts that long-term Treasury yields will soon exceed 5%. Billionaire hedge fund manager Bill Ackman appeared on CNBC the previous day and predicted, "The 30-year yield will be in the mid-5% range, and the 10-year yield will approach 5%." Ed Yardeni, head of Yardeni Research, stated in a report that "the federal government's increasing deficit has fueled concerns about bond supply," diagnosing that so-called 'bond vigilantes' are marching by selling large amounts of bonds, thereby pushing yields higher.

Recent remarks from Fed officials also reflect a hawkish (monetary tightening) tone. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said at an event that day, "I want to pause," but added, "It will take a long time before we see rate cuts." Loretta Mester, President of the Cleveland Fed, emphasized the need for further rate hikes the day before. Vice Chair Michael Barr stated, "The most important question at this point is not whether additional rate hikes are needed this year, but how long rates should be maintained at sufficiently restrictive levels," signaling a prolonged period of high interest rates.

Earlier, the Fed decided to hold rates steady at the September Federal Open Market Committee (FOMC) meeting but raised its rate projections for next year and the year after through the dot plot. In particular, it raised the median rate forecast for the end of next year from 4.6% to 5.1%, signaling that high rates in the 5% range will persist. Jamie Dimon, chairman of JP Morgan Chase and known as the 'Emperor of Wall Street,' mentioned rates in the 7% range the day before. In an interview with Bloomberg TV, he said, "When I previously said rates would reach 5%, people asked if that was really true. (A 7% rate) is also possible."

As Treasury yields soared that day, the New York stock market closed sharply lower. The Dow Jones Industrial Average, composed of blue-chip stocks, ended down 1.29% from the previous session. The S&P 500, focused on large-cap stocks, fell 1.37%, and the tech-heavy Nasdaq dropped 1.87%. Meanwhile, the value of the U.S. dollar surged. The Dollar Index, which measures the dollar's value against six major currencies, surpassed the 107 level.