**[U.S. Treasury Yields Near Highs, Waller Faces Test: One Sentence Might Stabilize the Bond Market]** BlockBeats News, September 9 – As the U.S. fiscal deficit, inflationary pressures, and the AI financing boom continue to push up long-term borrowing costs, pressure on the U.S. Treasury market has intensified. What the market is truly waiting for may not be the Federal Reserve restarting quantitative easing, but rather Chair Kevin Waller providing further clarity on his policy "reaction function." Recently, global bond yields have been climbing steadily, with the 10-year U.S. Treasury yield currently around 4.80%, nearing its highest level since 2025. At the same time, market expectations for future Fed rate hikes have risen, and investors are concerned that the U.S. fiscal deficit and corporate AI infrastructure financing demands will further drive up long-term yields. Waller previously stated at the Jackson Hole symposium that there is still more work to be done in combating inflation, which the market interpreted as a signal that further rate hikes remain possible. Currently, the market estimates a roughly 60% probability of a Fed rate hike next week, which, if realized, would be the first rate hike in over three years. Analysts point out that what the bond market currently lacks is a clear explanation of the Fed's "reaction function"—that is, which economic indicators the Fed focuses on, how it balances inflation and growth risks, and what changes would prompt it to adjust its policies. Clearer policy communication could help reduce investor uncertainty about inflation and the trajectory of monetary policy. In contrast, while the Fed has a balance sheet of approximately $6.7 trillion and could influence long-term rates through quantitative easing, the market generally believes that Waller is unlikely to restart QE. Waller has previously criticized large-scale asset purchases for potentially distorting wealth distribution and has emphasized the importance of the Fed's independence. Therefore, against the backdrop of fiscal deficits, inflation, and the AI financing boom collectively pushing up long-term yields, the Fed's more realistic option may not be to deploy its balance sheet again but rather to use clearer policy communication to convince the market that the Fed will act if inflationary pressures persist. [Original Link]