The "official" explanation for the rise in 10-year U.S. Treasury bonds and the U.S. dollar index is here, and the July U.S. stock earnings season is coming!
In the above, I mentioned that the sharp increase in the 10-year US Treasury yield may be due to two reasons. The current situation is consistent with the second reason, which is the expected inflation rebound (see the previous article for details). Now Bloomberg’s "official" explanation is here. Let’s take a look.
According to Bloomberg, poor economic expectations after the US election in November, especially inflation expectations, have led people to pursue higher bond yields, which has caused the 10-year US Treasury yield to surge, approaching the key index of 4.5%.
Traders' main concerns about the post-election economy in the United States are the current government's debt and deficit, especially the current fiscal spending, which has always accounted for more than 20% of GDP. It currently accounts for 23%-24%, far higher than the level of 20%. This has led the market to expect a slowdown in the US economy and a possible vicious rebound in inflation.
Of course, at this point, many people may ask, will it trigger expectations of a US economic recession?
At present, there is not much evidence to indicate expectations of an economic recession. Of course, there may be one in the future, but there is none at present.
Moreover, even an economic recession is not much better for risk markets.
The expected short-term inflation rebound will push up the US bond yields and absorb the risk market liquidity. The expected short-term US economic recession will push up the US bond prices and also take away the risk market liquidity. The overall situation is sucking blood. As long as the Fed does not cut interest rates and release water, the overall environment will not be too friendly.
At the same time, we can see that the US dollar index has soared, currently at 105.95, and is about to touch 106, which is still caused by US Treasury yields.
In the short term, the yield on U.S. Treasury bonds has soared, and U.S. Treasury bonds are still considered by many to be stable and safe assets. This has led to asset capital flowing into the United States, resulting in an increase in demand for the U.S. dollar in the short term, thereby pushing up the price of the U.S. dollar index.
Finally, it should be noted that from the 17th of this month to August, the U.S. stock market will usher in the second quarter 2024 financial report season.
The second quarter financial reports of the seven technology giants, MicroStrategy, and Coin will be released in this cycle. I will find time to sort out the specific time of the financial reports of these companies for everyone.
Currently, this article from Bloomberg also mentioned the second quarter financial reports of U.S. stocks. The interpretation given is that due to the rapid growth of U.S. stocks since 2024, the release of the second quarter financial reports will bring greater pressure on these rapidly growing companies.
To put it simply and bluntly, if the performance has been good before, then market expectations will be even higher. If the financial report results and expectations for future financial conditions fail to meet market expectations, it will inevitably cause market fluctuations.
In fact, judging from the several record-breaking rises in U.S. stocks at the beginning of the year, especially leading companies such as Nvidia, Apple, and Microsoft, there is indeed greater pressure on the second-quarter financial reports. Let's see what results the companies will produce by then.
