The recent decline is because the ten-year U.S. Treasury yield has violently surged to 5.087%. The triggering factors behind this include the recently released U.S. PMI, which increased from 56 last month to 58.4 in September, and the corporate input cost index also rose from 59.9 to 66.4. In simpler terms, businesses' orders and activities are increasing, but the rising costs are accelerating. The stronger the economic performance, the more confidence the Federal Reserve has to continue raising interest rates, and as costs continue to rise, it raises market concerns that inflation is not easy to bring down.
For U.S. stocks, if U.S. Treasury bonds can offer higher yields, investors will demand higher returns from stocks. The same earnings expectations make it harder for funds to accept the original stock prices. At the same time, the costs for companies issuing new bonds or refinancing old debts may also rise, especially for companies that are still heavily borrowing to expand, as they will need to allocate more revenue to pay interest in the future.
Bitcoin and other cryptocurrencies will also be affected by this environment, as the demand for returns increases and the willingness to bear volatility decreases, which may reduce the buying pressure willing to chase higher prices.
Therefore, even though the next monetary policy meeting has not yet arrived, the market can raise the costs of long-term borrowing in advance. It cannot be assumed that the effects of the last interest rate hike ended with its implementation. Next, we need to see whether the ten-year yield can fall back or will continue to stay above 5% and rise further.
If we add rising oil prices to the mix, the market will need to simultaneously digest the impacts of increasing energy costs and sustained high interest rates, and the rebound of U.S. stocks and the crypto market will face more resistance.
A @Gate, trading more markets
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