CITIC Securities: Beware of the Developed Markets' Long-term Interest Rates Rising Again in Tandem

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ME News message, May 18 (UTC+8). A research report from Citic Securities said that on May 15, the 10Y U.S. Treasury yield broke through 4.5%, and the 30Y U.S. Treasury yield moved above 5.0%, with two key psychological thresholds breached. At the same time, long-term interest rates across major developed markets such as the UK, Japan, and Germany rose in tandem, and global risk assets generally faced pressure. We believe the recent rise in interest rates is driven by the U.S.’s broad-based rise in inflation data, the “Wash Shock” muscle memory, heightened pressure from U.S. Treasury supply, political turmoil in the UK, and concerns about capital returning triggered by higher Japanese bond yields. As the global asset pricing anchor, the significant increase in long-term U.S. Treasury yields is expected to bring a stronger U.S. dollar, knock valuation for growth stocks, weigh on precious metals and long-duration credit assets, and deliver a liquidity shock to emerging markets. We believe the market had previously continued to overlook oil price and inflation risks, but under conditions in which global crude oil inventories are continuously being depleted, oil prices + inflation + interest rates at high levels may remain a persistent reality. Going forward, the key focus will be on developments in the Strait of Hormuz and policy signals after Wash takes office. (Source: PANews)
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