The U.S. Treasury market faces the test of Friday's employment report: the double-edged sword of high yields and diverging inflation expectations

汇通财经2026/06/05 03:20

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(1) Over the past three months, oil prices and US Treasury yields have climbed in tandem, but Wall Street is concerned that investors are losing patience and demanding higher returns. While higher US Treasury rates may benefit investors, they could also trigger a vicious cycle—more of the income of the US economy, households, and businesses would be spent on interest payments, while the stock market’s upward momentum could be curbed (the S&P 500 has risen nearly 27% in a year). (2) Despite the average gasoline price rising to $4.26 per gallon, the bond market is betting that the inflation rebound won't last. The key 10-year breakeven inflation rate has increased by just about 10 basis points since February, to 2.39%, and according to LPL Financial strategists, this level still hasn’t shaken confidence in the Federal Reserve’s 2% target. However, the 10-year US Treasury yield once surged 70 basis points and last month hit a high not seen since January 2025, approaching 5%. (3) Friday’s jobs report will be a major test. NATIXIS strategists pointed out that recent data only shows “stabilization”; slowing wage growth, shrinking real incomes, and persistent inflation may drag on growth and push yields lower. If the data disappoints the market, it could trigger panic; if inflation proves stubborn and employment remains steady, the Federal Reserve may keep rates unchanged or even lay groundwork for rate hikes. LPL strategists said the market may expect a “soft landing +”, meaning the economy remains resilient but yields stay high—the impact of high oil prices has yet to be fully felt, and the longer it persists, the higher the odds of an economic slowdown.

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Updates with closing prices By Satoshi Sugiyama TOKYO, Oct 8 (Reuters) - Japanese shares fell more than 1% on Thursday, down for a second consecutive session, as investors paused after recent rallies, wary of the US rate outlook, higher yields and geopolitical tensions. The Nikkei 225 Index .N225 fell 1.42% to close at 69,042.11, while the broader Topix .TOPX slid 1.51% to 4,091.46. "Japanese shares had risen at a rapid pace through yesterday, and profit-taking has since picked up. That selling pressure appears to be continuing today," said Hiroki Takei, strategist at Resona Holdings. Japanese AI-related shares were subdued even after Samsung Electronics 005930.KS, the world's largest memory chipmaker, projected a nearly ninefold jump in third-quarter operating profit from the same period last year. Shares of chipmaker Rohm 6963.T lost 5.19%, the biggest percentage drag in nearly a month, while technology investor SoftBank Group 9984.T shed 4.28% and Tokyo Electron 8035.T dropped 2.48%. Concerns over US monetary policy remained in focus after Federal Reserve minutes released on Wednesday showed most participants signalling another rate hike by year-end. Market participants remained wary of French and Italian debt markets, with rising energy prices and fiscal concerns keeping sentiment fragile. Geopolitical tensions also dampened risk appetite, as increased attacks on shipping in the Gulf and the Strait of Hormuz fuelled concerns over Middle East oil supplies and pushed crude prices higher. Breadth was negative, with 165 decliners in the Nikkei 225 against 56 advancers and four unchanged. The largest percentage losers in the Nikkei were semiconductor silicon wafer supplier Sumco 3436.T, down 5.73%, followed by construction machinery maker Komatsu 6301.T, down 5.52%, and agricultural machinery and equipment maker Kubota Corporation 6326.T, down 5.42%. The largest percentage gainers were cybersecurity software company Trend Micro 4704.T, up 3.89%, followed by IT consulting firm Nomura Research Institute 4307.T, whic

Reuters•2026/10/08 06:54