The 10-year US Treasury yield approaches the 4.8% mark, cross-asset "stress test" imminent

According to Odaily, Miller Tabak + Co.'s chief market strategist Matt Maley stated that the 10-year US Treasury yield is approaching the key level of 4.8%. If it continues to break through this threshold, it could have a “substantial impact” on other asset classes.

“We remain concerned about the US Treasury market... Rising fiscal deficits, massive debt issuance, and ongoing large-scale corporate borrowing continue to put pressure on long-term yields... While the US Treasury has attempted to verbally intervene to suppress rates, these efforts have so far proven ineffective,” Maley wrote in a weekend report.

He pointed out that if the 10-year US Treasury yield stays above 4.8%, matching the high seen in January 2025, it will be “particularly worrying.” This may signal that the market’s anxiety is overtaking policy management, with borrowing costs now mainly driven by fiscal pressures.

US Treasury’s verbal intervention fails, yields remain stubbornly high

Recently, both the US Treasury and Secretary Scott Besant tried to push yields down via verbal intervention, but the market was unconvinced. The timing was carefully chosen, as investors were massively shorting Treasuries during a period of thin summer trading, and policymakers had hoped that verbal intervention would ignite a reversal rally.

However, things did not go as planned. Maley noted that this only exposed an awkward reality: without truly addressing the fiscal roots, merely making statements is unlikely to reassure the market. Now, with the US budget deficit at a record high and national debt surpassing $40 trillion, investors are finding it increasingly difficult to ignore. What’s more, the government is also competing with corporations for scarce funds—as corporate bond issuance demand remains strong.

The supply-side pressure is not to be underestimated. Maley estimates that over $8.4 trillion in US Treasuries will mature and need to be rolled over from now until the end of the year, and September is likely to see a historic peak in new high-grade corporate bond issuance. Goldman Sachs has recently raised its forecast for 2026 dollar-denominated investment-grade bond issuance to $2.3 trillion.

The pressure is not limited to the US—Japan, the UK, France, and other developed economies also face significant fiscal challenges. Investors’ required returns on government bonds are rising, driving a wave of structural reshaping in global bond markets.

Maley believes this does not mean yields will climb in a straight line. Extreme bearishness and positioning could trigger a violent short squeeze, pushing US Treasury futures sharply higher in the short term. However, he emphasized that even if such a rebound occurs, it would more likely be a tactical fluctuation rather than a long-term trend reversal.

The 4.8% threshold is critical, may trigger a cross-asset chain reaction

At present, 5% has become the psychological barrier for long-term Treasury yields, but Maley has noticed that the market’s tolerance threshold has already moved higher several times—from 4.4% to 4.5%, then to 4.6%, and now to 4.7%.

If long-term US Treasury yields continue to break above 4.8%, the impact may extend far beyond the bond market. Michael Chen, General Manager of Ark Invest Hong Kong, stated that a disorderly rise in long-term Treasury yields could trigger re-pricing of assets dependent on long-term cash flows, including ultra-long-duration bonds, high-valuation growth stocks, commercial real estate, and certain private assets.

Chen said the Treasury market is under structural pressure. In the “fiscal-dominated” environment, the risk premium investors require for holding long-term government bonds will continue to rise. His current strategy is to be bullish on gold and hard currencies as structural hedges, underweight ultra-long-dated Treasuries, and to continuously invest in high-quality stocks, physical assets, and AI infrastructure (power, grids, energy storage, data centers).

HSBC is also adopting a more cautious stance toward long-dated developed market bonds. The bank has raised its forecast for the 10-year US Treasury yield at the end of 2026 from 4.30% to 4.65%, citing a structural rise in the long-term rates floor, coupled with a shift toward a more hawkish monetary policy. Meanwhile, HSBC lifted its 10-year German Bund yield forecast for the end of 2026 from 2.8% to 3%, stressing continued caution toward long-term bonds in developed markets.

In Maley’s view, even if yields pull back in the short term, it does not solve the underlying long-term problem. “If the Treasury market sees a rebound in the near future and yields fall— even if it lasts until after the midterm elections—as long as there is no substantive fiscal reform, this predicament remains unsolved in the long run,” he said.

US Treasury to “double” buybacks; this week’s auction will be a key test

It is worth noting that the US Treasury will launch the previously announced plan to “double” Treasury buybacks this week, with the new arrangements taking effect on September 9. This move aims to improve market liquidity and ease upward pressure on long-end yields.

Retrospectively, after the announcement of the expanded buybacks, the 30-year Treasury yield fell by nearly 10 basis points at one point. However, this key indicator of long-term financing costs quickly rebounded the next day. Some analysts pointed out that expanding the scale of buybacks mainly shifts refinancing pressure into the future, without addressing the core issue of deficit reduction.

The more direct test will come from this Thursday’s 10-year US Treasury auction. The previous auction saw a winning yield of 4.68% and a bid-to-cover ratio of 2.53; currently, the 10-year Treasury yield has risen to 4.78%. This auction will be a crucial signal for gauging investors’ appetite for long-term debt at elevated yield levels.