U.S. Treasury Yields Hit New Highs as Rate Cut Expectations Fade

Market Overview

Following the release of inflation data, both U.S. equity and bond markets initially moved higher. However, persistent concerns over tariffs dampened rate cut expectations, causing markets to retreat. Despite the overall weakness, Chinese ADRs outperformed broader indices, while the U.S. dollar extended its recent rally. The yield on the 10-year Treasury note reversed course and climbed 4.8 basis points to 4.481%, its highest level since February. The U.S. Dollar Index closed up roughly 0.6%.

In the crypto space, Bitcoin dropped over 3% after the U.S. House failed to pass a procedural vote on key “crypto week” legislation. Gold prices pulled back by more than 1.3% from their intraday highs, while crude oil remained under pressure, with WTI fluctuating narrowly below the $67 per barrel mark.

Hot Topics to Watch

● Q2 Earnings Season Kicks Off on Wall Street

Amid tariff concerns, S&P 500 earnings for Q2 are projected to grow just 5%, marking the slowest pace since Q4 2023. Bank of America believes the recent market rebound signals potential earnings underestimation and advises investors to monitor four key themes: capex guidance, layoffs, FX impact, and implications of the “Inflation Reduction Act.”

● Japan Bond Crisis Enters New Phase

The yield on Japan‘s 10-year government bond has surged toward 1.6%, a level unseen since 2008. Unlike super-long maturities, the 10-year yield has a more direct impact on the real economy. The timing of this spike—right before the upper house elections—has triggered market concerns that a loss for the ruling coalition could lead to fiscal policy shifts. The opposition’s campaign proposals may widen the budget deficit, potentially triggering a bond selloff reminiscent of the UKs “Truss moment.”

Key Events to Watch (GMT+8)

• 20:30 – U.S. June PPI YoY / MoM

• 21:15 – U.S. June Industrial Production MoM; FOMC 2026 Voter & Cleveland Fed President Mester Speaks

• 22:00 – Fed Governor Barr Speaks on Financial Regulation at Brookings

• 22:30 – EIA Weekly Crude Oil Inventories (ending July 11)

Overnight (Next Day)

• 02:00 – Fed Releases Beige Book Economic Report