US Treasury yield breaks 5.04%...Will stock market fall further on Fed's '94% rate hike probability'?

▲ US stock market, Federal Reserve (Fed), Treasury bonds, interest rate hike/AI generated image

As the US 10-year Treasury yield broke 5.04%, hitting a 19-year high, the New York stock market is on edge ahead of the Federal Reserve (Fed) meeting.

According to MarketWatch on September 15 (local time), the US 10-year Treasury yield surpassed 5.04% during trading hours. This is the first time it has reached such a level since the 2007 global financial crisis. Rising international oil prices leading to inflation concerns, high US national debt, and expanding fiscal deficits pushed up Treasury yields. An increase in bond issuance by companies expanding their artificial intelligence (AI) investments was also cited as a factor increasing supply burden.

Stock market futures also felt pressure from rising Treasury yields. S&P 500 futures fell by 0.3% at one point, and Dow Jones Industrial Average futures declined by 0.4%. Nasdaq 100 futures also dropped by 0.3%. MarketWatch reported that as the 10-year Treasury yield rose to its highest level since 2007, the US stock market signaled a weak opening.

Market attention was focused on the Fed meeting, which began with a two-day schedule. The US consumer price inflation rate is 3.4%, exceeding the Fed's target of 2%. According to CME FedWatch, the futures market reflected a 94% probability of the Fed raising the benchmark interest rate by 0.25 percentage points. If the hike materializes, the benchmark interest rate range would be 3.75% to 4%.

The dollar also reflected the Fed's potential for tightening. The dollar approached the 155 yen mark against the Japanese yen. The market reflected a 93% probability of the Fed raising interest rates, while the Bank of Japan's possibility of a rate hike was assessed at 80%. The divergence in monetary policy outlooks between the US and Japan also impacted the foreign exchange market.

The burden also spread across risk assets. Bitcoin (BTC) showed weakness ahead of the vote on the US cryptocurrency market structure bill, and Polymarket's probability of the bill passing this year dropped from 31% to 19%. The US stock market, bond market, foreign exchange market, and cryptocurrency market are all closely watching the Fed's interest rate decision and future policy signals as key variables.

[Article Key Summary]

-The US 10-year Treasury yield broke 5.04%, reaching its highest level since 2007.

-The futures market reflected a 94% probability of the Fed raising interest rates by 0.25 percentage points.

-S&P 500, Dow, and Nasdaq 100 futures all faced downward pressure amid the surge in Treasury yields.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. This content should be interpreted for informational purposes only.*