Dongwu Securities: US Treasury rates are seeking a peak, making it easy to see a downward turning point.

Last week, the 10-year U.S. Treasury yield experienced two rounds of increases, briefly reaching nearly 4.75% during intraday trading. In terms of driving factors, the rise in the yield following the July 29 FOMC meeting was primarily driven by inflation risk premiums, influenced by rising oil prices and market concerns over Waller's "repair" of the inflation target. The acceleration in the 10-year Treasury yield on July 31 can be attributed to hawkish remarks from Federal Reserve officials that heightened expectations for tighter monetary policy; concerns over potential sell-offs of U.S. Treasuries in response to yen exchange rate intervention news may have also contributed. Looking ahead, we expect U.S. Treasury rates to maintain a top-level fluctuation while being prone to a downward turning point. The downward drivers include: The rising demand for Trump's "TACO"; The tapering of previous fiscal stimulus and tightening financial conditions suppressing domestic demand, which could lead to weaker U.S. economic data in Q3 2026, consequently cooling the current overestimated expectations for interest rate hikes; In the short term, the U.S. joining in on currency intervention may alleviate concerns over Treasury sell-offs. This week, attention will be on the July non-farm payroll data; we expect a weakening trend in non-farm employment in the baseline scenario. However, due to the very low response rate in the June survey and issues with data quality, there is also the risk of significant upward revisions to the June data or the July data maintaining resilience under a low base, which could drive expectations for interest rate hikes to heat up.