Guangda Securities: After the tax reduction bill is implemented, it may raise the central interest rate of US Treasuries in the long term.

Guangda Securities released a research report stating that the recent rise in US bond yields has been continuous, climbing from 4.25% at the beginning of May to 4.45% on the 15th, with a cumulative increase of 20 basis points. Looking at the reasons, one is that after the easing of Sino-US trade tensions, the tariff reduction implies a decrease in the risk of recession in the United States, and the Federal Reserve is not in a hurry to cut interest rates in the short term. The second reason is that Trump's tax cuts have made significant progress, which will have a significant impact on the US government's deficit, and there may be further upward risks to US bond yields. Existing research shows that after the tax cuts are implemented, the increase in the size of the US government's fiscal deficit is estimated to be around $400 billion per year, indicating an average increase of 20% in the US government's deficit each year, which will long-term raise the central level of US bond yields. In terms of timing, US bond yields may rise again in the second half of 2025. With the tax cuts being rolled out in the second half of the year, it objectively helps to alleviate expectations of economic recession, combined with the gradually apparent impact of tariffs on inflation, the Federal Reserve may turn hawkish again, and the US debt ceiling issue may lead the Treasury to increase US bond supply in the second half of the year, causing US bond yields to rise again in the second half of 2025.