The unexpectedly strong US retail sales data has fueled expectations of the Federal Reserve raising interest rates.
The retail sales in the United States for September, announced on Tuesday, increased by 0.7% month on month. Although slightly slower than the revised 0.8% growth rate in June, it was far stronger than the market's expected growth rate of 0.3%, marking the sixth consecutive month of growth.
Retail data has boosted market expectations that the Federal Reserve will raise interest rates in the future. Tuesday's swap contract prices reflect investors' current expectations that the probability of the Federal Reserve raising interest rates in January next year will rise to over 60%, and a rate hike may also occur in December this year, but the probability of a rate hike is lower than that of January next year.
After the retail data was released, the price decline of US treasury bond bonds expanded, and the yield rose in the middle of the day, with the yield rising by more than 10 basis points.
The benchmark 10-year US Treasury yield quickly surged to 4.80%, with US stocks approaching 4.86% in midday trading, breaking the high since October 6th and approaching the high since July 2007, which was refreshed on October 6th.
The trading of some short-term options shows that investors are seeking to hedge against the risk of a 10-year yield exceeding 4.95% by the end of this month.
The two-year US Treasury yield, which is more sensitive to the interest rate outlook, was close to 5.24% in midday trading on US stocks, setting a new high since July 2006.
The yield on five-year US Treasury bonds rose above 4.89% in late trading, reaching a new high since July 2007.
Gregory Faranello, head of US interest rate trading and strategy at AmeriVet Securities, commented that US bond yields seem likely to retest recent highs. Although the Middle East conflict has led to a small number of investors fleeing and investing in high-quality assets, long-term US bonds continue to be in trouble.
Jack McIntyre, portfolio manager at Brandywine Global Investment Management, stated that interest rates may further rise until problems arise. Investors are pondering the question of whether inflation will decline on its own or only when the economy collapses.
The media pointed out that in the past week, the fluctuation of US debt was particularly large, and the yield fluctuated by at least 10 basis points, which was the largest fluctuation period since the COVID-19 in March 2020.