US 10-Year Treasury Yield Approaches 4.75%, Long-Term Rate Outlook Rises

The yield on the US 10-year Treasury note has approached 4.75%, highlighting renewed concerns over long-term interest rates. Mark Zandi, chief economist at Moody's Analytics, stated that the Iran war, the Federal Reserve's unclear communication, and the widening fiscal deficit are the main factors driving interest rate increases. The 10-year US Treasury yield closed at 4.732% on August 21, while the yield as of August 20 was 4.69% for the 10-year and 5.23% for the 30-year. Zandi explained that the war is fueling inflation and that investors are reflecting the possibility of interest rate hikes. Long-term rates are influenced not only by expectations for the benchmark rate but also by inflation expectations, fiscal conditions, and the supply and demand for government bonds. He diagnosed that the widening fiscal deficit and the increase in corporate bond issuance for AI infrastructure investments are putting upward pressure on long-term rates. Although the US Treasury has announced measures to curb rising long-term rates, Zandi predicts that their effectiveness will be limited. He also mentioned the possibility of resuming quantitative easing, suggesting that normalizing crude oil transport and providing policy direction clues are conditions for curbing interest rate increases. The rise in long-term rates could impact dollar liquidity and the prices of risk assets.

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