U.S. Long-Term Treasury Yields Rebound in a Day, 10-Year Back Above 4.7%

U.S. long-term Treasury yields rebounded within a day, adding to market unease. The 30-year Treasury yield spiked to 5.27% intraday, recovering the level it held before the Treasury announced its bond buyback, and the 10-year yield, the global benchmark, also came close to its peak. Analysts attribute the rise to U.S. debt surpassing $40 trillion combined with a convergence of structural headwinds.

Treasury Secretary Janet Yellen signaled the possibility of further intervention to respond to surging Treasury yields. Yellen said current rates fail to reflect economic conditions and emphasized that the Treasury could expand the size of its buybacks beyond the existing $4 billion or more. She also previewed fiscal consolidation measures, expressing the government's commitment to stabilizing the market.

Views within the Federal Reserve on the direction of monetary policy are divided. St. Louis Fed President Alberto Musalem attributed the recent surge in long-term Treasury yields to competition for capital driven by economic growth and expanding investment in artificial intelligence (AI), and repeatedly stressed the need for preemptive additional rate hikes. In contrast, San Francisco Fed President Mary Daly judged that the current rise in rates is not yet a signal that policy must change and took a hold-steady position.

San Francisco Fed President Mary Daly interpreted the recent rise in long-term rates as the result of global and structural factors combined. Daly said the rise reflects a mix of AI investment, fiscal deficits, and geopolitical risks, and drew a line by saying it is not a direct signal that the Fed must change monetary policy now. This signals a dovish stance, in which the Fed will not hastily respond to short-term market swings.

The slowdown in earnings at Walmart, the largest U.S. retailer, points to weakening consumer sentiment and the possibility of an economic downturn. Walmart recorded 2.6% growth in U.S. comparable-store sales in the second quarter, its lowest rate in six years. This is read as a strong sign that consumers are tightening their wallets amid high prices and high interest rates.

However, Nvidia has not clearly addressed the reports and has kept its distance from them.