On Wednesday, the U.S. Treasury market experienced a fierce sell-off, with yields across various maturities surging sharply to hit multi-year highs. The benchmark 10-year Treasury yield jumped 14.7 basis points in a single day to 5.113%, reaching its highest level since July 2007. The 30-year Treasury yield, which is more sensitive to inflation, rose 9.9 basis points to 5.401%, hitting a high not seen since 2004. Meanwhile, the 2-year Treasury yield, reflecting policy expectations, climbed 11.8 basis points to 4.893%, peaking at a more than two-year high. As a key indicator directly affecting the cost of household debt such as newly issued mortgages and auto loans, its rapid surge has not only pushed up financing costs across the economy but also sparked concerns on Wall Street about mounting pressure on the stock market. Consequently, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite fell 0.6%, 0.7%, and 1.1%, respectively.

The core trigger for this bond market turmoil was better-than-expected U.S. economic data. The latest September flash manufacturing PMI showed that U.S. manufacturing activity expanded at the fastest pace since July 2021, marking four consecutive months of growth. Meanwhile, the services index climbed to 58.7, ranking among the highest levels in nearly five years, with input costs rising at the fastest rate in almost four years, driven primarily by fuel and transportation costs. This report, reflecting both robust demand and cost pressures, completely shattered the previous calm in the bond market, prompting traders to significantly adjust their bets on the Federal Reserve's monetary policy. According to CME Group data, the market's expectation for another rate hike by the Fed in October surged from 53% the previous day to 77%, while the probability of at least one rate hike before the December meeting has approached 95%.

Beyond economic data, multiple external factors are also exacerbating the selling pressure on U.S. Treasuries. Rising international oil prices and the wild fluctuations in European 10-year government bond yields have created a resonance effect. As the yield spread between the U.S. and other markets narrows, the cost for overseas investors to hedge dollar assets decreases, leading some funds to flow back from the U.S. Treasury market to their home countries. Additionally, a weak 5-year Treasury auction further dampened market sentiment. The yield broke through a key technical level but lacked bid support, indicating that investors are temporarily adopting a wait-and-see stance amid the sharp drop. Although the U.S. Treasury plans to alleviate market pressure by increasing the scale of bond buybacks and has scheduled up to $6 billion in buyback operations for Thursday, market participants generally believe that these measures will have limited substantive impact on long-term interest rates.

Currently, the total U.S. national debt has surpassed the $40 trillion mark. Coupled with the massive financing needs brought by the Treasury, European countries, and AI infrastructure construction, any tremor in the bond market is under intense scrutiny. Although strong economic fundamentals continue to support corporate earnings and stock market trends, the continuously rising bond yields are forcing the market to reassess the risks of future fiscal tightening. As the third-quarter earnings season is about to kick off, the next move in U.S. Treasury yields and their effect on pushing up global financing costs are becoming the core variables driving global asset price volatility.