The 10-year U.S. Treasury yield approaches the 4.8% threshold, with cross-asset "stress tests" imminent.

Miller Tabak + Co.'s Chief Market Strategist Matt Maley stated that the 10-year U.S. Treasury yield is approaching a critical level of 4.8%. If it continues to break through this threshold, it could have a "substantial impact" on other asset classes. "We remain concerned about the U.S. bond market... The rising fiscal deficit, massive debt issuance, and large-scale corporate borrowing continue to exert pressure on long-term yields... Meanwhile, the U.S. Treasury's attempts to lower rates through verbal intervention have not been effective, at least so far," Maley wrote in a report over the weekend. He pointed out that if the 10-year Treasury yield consistently exceeds 4.8%, which is the high reached in January 2025, "it will be particularly worrisome." This could mark a shift in market anxiety that surpasses policy interventions, with borrowing costs being driven by fiscal pressures. The U.S. Treasury's "verbal intervention" has failed, and yields remain elevated. Recently, the U.S. Treasury and Secretary Scott Bessen attempted to use verbal intervention to suppress yields, but the market did not respond favorably. The timing of this operation was crucial, as investors were heavily shorting U.S. Treasuries during a season of low summer trading, and policymakers hoped that verbal intervention would ignite a rebound. However, things did not go as planned. Maley noted that this exposed an awkward reality: merely making statements without addressing the fiscal root causes is unlikely to placate the market. With the U.S. budget deficit soaring and national debt surpassing $40 trillion, it is becoming increasingly difficult for investors to ignore this. Furthermore, the government is competing with corporations for limited fundscorporate debt issuance is also strong. The pressure on the supply side cannot be underestimated. Maley estimates that from now until the end of the year, over $8.4 trillion in U.S. Treasury bonds will need to be rolled over, and September is likely to witness a historical peak in issuance of high-grade corporate bonds. Goldman Sachs has recently raised its 2026 U.S. dollar investment-grade bond issuance forecast to $2.3 trillion. This pressure is not limited to the U.S.; Japan, the U.K., France, and other developed economies are also facing significant fiscal challenges. Investors are increasingly demanding higher returns on government bonds, which is driving a structural realignment in the global bond market. Maley believes this does not mean yields will rise in a straight line. Extreme bearish sentiment and positioning may trigger a significant short-covering rally that could drive U.S. Treasury futures sharply higher in the short term. However, he emphasizes that even if such a rebound occurs, it is more likely to be a tactical fluctuation rather than a long-term trend reversal. The 4.8% threshold is critical and may trigger a cross-asset chain reaction. Currently, 5% has become a psychological level for long-end U.S. Treasury yields, but Maley has noticed that the market's tolerance threshold has been raised several timesfrom 4.4% to 4.5%, then to 4.6%, and now to 4.7%. If long-term U.S. Treasury yields continue to breach 4.8%, the implications could extend far beyond the bond market. Michael Chen, General Manager of Noah Ark in Hong Kong, stated that an unrestrained rise in long-term U.S. Treasury yields could lead to a repricing of assets dependent on long-term cash flows, including ultra-long-duration bonds, overvalued growth stocks, commercial real estate, and certain private equity assets. Chen stated that the U.S. Treasury market is under structural pressure, and in a "fiscal-dominated" landscape, the risk premium demanded by investors holding long-term government bonds will continue to rise. His current strategy involves favoring gold and hard currency as structural hedging tools, underweighting ultra-long-duration U.S. Treasuries, while continuously investing in quality stocks, tangible assets, and AI infrastructure (electricity, power grids, energy storage, data centers). HSBC has also adopted a cautious stance toward long-duration bonds in developed markets. The bank adjusted its forecast for 10-year U.S. Treasury yields at the end of 2026 from 4.30% to 4.65%, citing a structural lift in long-term rates and a shift toward a more hawkish monetary policy direction. Simultaneously, HSBC raised its forecast for 10-year German bond yields at the end of 2026 from 2.8% to 3%, emphasizing overall vigilance toward long-end bonds in developed markets. In Maley's view, even if yields fall back in the short term, it does not resolve the underlying long-term issues. "If the U.S. Treasury market sees a rebound soon, and yields decline accordinglyeven if this rebound lasts until after the midterm electionsas long as there are no substantial reforms on the fiscal side, this predicament remains unsolvable in the long run," he stated. The U.S. Treasury is implementing its "doubling" buyback plan this week, set to take effect on September 9. This move aims to improve market liquidity and ease upward pressure on long-end yields. Looking back, after the announcement of the expanded buyback, the 30-year Treasury yield fell nearly 10 basis points at one point. However, this key indicator reflecting long-term financing costs rebounded the next day. Analysts have pointed out that increasing the buyback size merely postpones refinancing pressures and does not touch upon the core issue of deficit reduction. A more direct test comes from this Thursday's U.S. 10-year Treasury auction. The last auction had a winning yield of 4.68% with a bid-to-cover ratio of 2.53; currently, the 10-year Treasury yield has risen to 4.78%. This auction will be a crucial signal to observe investors' willingness to take on long bonds at these high yield levels.