The 10-year U.S. Treasury yield briefly broke above 5.3% during intraday trading, reaching a high of 5.306%, and is now hovering around 5.3%. From the post-PCE low of about 5.20%, it has already rebounded by over 10 basis points. The relief brought by the inflation data didn’t hold. This time, the core PCE rose 0.2% month-on-month, lower than the expected 0.3%, which is indeed good news. But in the same report, personal consumption expenditures grew by 0.9%. Even after accounting for price increases, real consumption still grew by 0.6%, indicating that Americans’ demand for consumption remains strong. In other words, inflation is milder than the market feared, but demand hasn’t cooled significantly. Coupled with ongoing pressure from energy prices, this single PCE report isn’t enough to convince the market that the Fed will end rate hikes soon or bring rates down. This yield rebound seems more like the market reassessing how long high interest rates will persist. If investors are worried about higher future rates and prolonged inflation, they’ll demand higher returns to buy bonds, leading to bond sell-offs and pushing yields higher. Currently, the market probability of an October rate hike has dropped to around 37%, meaning the 10-year yield breaking 5.3% doesn’t necessarily signal a rate hike in October. Long-term bonds are still reflecting interest rates and risks over the next few years. Simply put, the market increasingly believes the Fed will keep rates high for longer, and the probability of further hikes is rising. For the market, if the 10-year yield remains at such high levels, even if the Fed pauses rate hikes in October, the cost of corporate financing and residential mortgages will struggle to come down significantly. Borrowing costs will stay high, and stock valuations will continue to face pressure. Especially if September inflation data continues to rise, the market will face even greater pressure. Shoutout to @Gate, trade more markets! #Finance #Markets #Investing