Oil prices fell below 100 yuan+Bezent called for US bond yields to fall back from 2002 highs

The Zhitong Finance App learned that US Treasury yields fell from their highest level since 2002, as oil prices fell below $100 per barrel, and US Treasury Secretary Scott Bessent insisted that the government debt burden could be controlled. The 10-year and 30-year US Treasury yields fell 3 basis points and 4 basis points, respectively, to 5.27% and 5.63%, while the 2-year Treasury yield remained essentially flat. Crude oil prices retreated on Tuesday as there were signs that more crude oil supplies were passing through the Strait of Hormuz.

This marks the end of the sell-off in the global bond market. Previously, the bond market continued to decline due to concerns about inflation caused by the war between the US and Iran and rising expectations of the Federal Reserve's further tightening of monetary policy.

Bezent tried to appease investors, saying that the combination of economic growth and spending restrictions would “soon” begin to change the US government's borrowing path. On Monday evening, during a fireside conversation in Pennsylvania, he said the government would begin to “reverse this trend.”

Questions are raised: the deficit is unresolved, and it is difficult to reassure

Despite this, the market still has doubts about Bezent's statement and is unwilling to lightly say that the bond market sell-off is over.

Macquarie strategist Gareth Berry said, “Given that the deficit is as high as 6% and there are no plans to reduce the deficit, the market is likely to be very skeptical. Talking about goals doesn't equal plans.”

Schroder Fund manager James Linger said he was concerned about more than just crude oil prices. “To see a meaningful rebound across the curve, the first condition is that energy prices begin to fall,” he said. “This refers not only to the price of crude oil, but also to the price of refined oil products.”

Additionally, Bridgewater Foundation founder Ray Dario warned that the US is nearing the limit of the debt cycle, and if spending continues to exceed revenue, it may face a crisis within three years. He said that US treasury bonds are easily affected by falling demand from China and Japan (America's two largest foreign creditors).

However, HSBC strategists believe that it is “excessive” for the market to bet that the Federal Reserve will raise interest rates by about 80 basis points in 2027, yet they still insist that the 5-year and 30-year US Treasury yield spreads widen. HSBC's US interest rate strategist Dilaj Narula wrote in the report: “We believe that the surge in volatility, combined with historical data showing that these levels lack clear technical resistance, has made many investors choose to wait and see, even though the appeal of high long-term interest rates is becoming more and more obvious.”