Fall, fall, fall, as an auction result triggers a chain collapse in the market.
U.S. dollar, down;
U.S. stocks, down;
U.S. bonds, down.
The straw that broke the market's back has appeared—the U.S. 20-year bond auction results were poor, causing the bond market to collapse again and triggering a significant drop in the stock market.
Last night, the U.S. Treasury issued $16 billion in 20-year bonds, with a winning yield of 5.047%. This is only the second time that the yield has exceeded 5% in a 20-year bond auction, which is 24 basis points higher than April's 4.810%.
Firstly, from a market impact perspective, the 'sell America' trade has returned. The dollar, U.S. stocks, and U.S. bonds are all falling simultaneously—the dollar has fallen for three consecutive days, and the yield on 10-year U.S. bonds has broken through 4.6%, with the U.S. stock market experiencing its largest single-day drop in nearly a month.
Secondly, the failure of the 20-year bond auction is not terrifying; what is terrifying is its connection to Moody's downgrade of the U.S. rating, as concerns about the U.S. fiscal situation in the market have even surpassed worries about the trade war—whether it is genuine credit concerns or worries about the 'instability' of the Trump administration, global investors are no longer enthusiastic about lending money to the U.S., and the trend of de-dollarization is quietly accelerating. This crisis of confidence has only just begun.
Thirdly, purely from market readings, the yield on 10-year U.S. bonds breaking through 4.6% has triggered a round of selling; if it further breaks through 4.7%, it will trigger an even larger sell-off. Such critical points are often rooted in the psychological expectations of technical traders. Levels around 4.75% to 4.80% often correspond to historical highs and futures basis structures; breaking through will open up more space. We recently warned that the ultimate target Wall Street traders are betting on is for the yield on 10-year U.S. bonds to reach 5%. If that is the case, there is still a significant amount of gains that the U.S. stock market needs to give back.
Fourth, gold has passively risen to $3,300, and the market has shifted from a risk-seeking mode to a risk-averse mode—in the context of 'selling America', it resembles a sell-off of risk assets after the double whammy of stocks and bonds—funds are not only leaving U.S. stocks and bonds but also the dollar, reflecting a collective flight from 'overall U.S. assets' rather than a single asset.
Fall, fall, fall—this is not only a continuous decline in numbers but also a severe questioning of U.S. financial credibility and the global pricing system. If even stable long-term bonds cannot attract sufficient demand, the 'moment that truly breaks the financial market' may be closer than we think. In the coming days, every percentage point rise in the 10-year yield will become a key touchstone for whether the market regains confidence.
