Have U.S. bond rates peaked? The fluctuation of long-term U.S. bond interest rates has been a focus of market attention recently.

Can the 10-year U.S. bond rate break through the October 2022 high of 4.34%, and what is the new high?

A review of the 12 Fed interest rate hike cycles in the past 60 years will reveal that the high point of long-term interest rates often occurs around the time the Fed last raises interest rates. What needs to be asked is, is 4.34% a reasonable reference frame? What are the characteristics of the shape of U.S. debt after the Federal Reserve suspended raising interest rates?

Hot thoughts: Have U.S. bond interest rates peaked? What will U.S. bond interest rates look like after the Federal Reserve suspends interest rate increases?

The starting point of this round of rising U.S. bond interest rates is around May 10, which mainly reflects the resilience of the economy and the easing of the impact of the SVB incident. The rise in U.S. bond interest rates since early August has been compounded by disturbances in supply and demand factors.

The U.S. Treasury Department's regular third-quarter refinancing meeting significantly increased the scale of net financing and increased the share of medium- and long-term bond issuance, triggering an increase in long-term U.S. bond interest rates. During the session on August 17, the 10-year U.S. bond interest rate once rose to 4.33%, which was only 1bp away from the high of 4.34% in October 2022. From experience, it is reasonable for the 10-year U.S. bond interest rate to return to 4.3% or even exceed the previous high of 4.34%. On the contrary, the rationality of 4.34% as a high point must be questioned. Because, on the one hand, the high of 4.34% occurred against the background of the Federal Reserve raising interest rates three times in a row by 75bp, but at that time, all parties’ expectations for the U.S. economy were pessimistic; on the other hand, compared with the SEP in September 2022, The federal funds rate target for 2023 was raised by 100bp.