Trump's continuous "interference" with the Fed's actions has caused the US bond yields to approach 5%. The market is worried about the increasing risk of the US becoming an "emerging market."

On Wednesday, the long-term US Treasury bond market once again sent out signals of unease. The yield on the 30-year US Treasury bond briefly approached 5% during trading, reaching its highest level since July, reflecting investors' concerns about future inflation risks and the impact on the independence of the Federal Reserve. On Wednesday morning, the yield on the 30-year US Treasury bond rose to 4.92% amidst selling pressure, leading to a steepening of the yield curve, with long-term interest rates rising faster than short-term rates. Although the yield eventually closed at 4.913% at 3 pm Eastern Time, basically unchanged from the previous trading day, the anxious sentiment in the market did not dissipate. Analysts pointed out that behind this round of selling, investors are worried that President Trump's recent aggressive actions against the Federal Reserve may weaken the central bank's independence, thereby raising inflation expectations and impacting the dollar and the US bond market, similar to emerging markets like Turkey. The ICE US Dollar Index (DXY) remained almost unchanged on Wednesday, following a weak performance on Tuesday. Mark Rosenberg, co-founder of GeoQuant, stated, "The US is becoming the developed economy with the closest proximity to emerging market risk, which could have far-reaching implications for the dollar and the US bond market." Recently, Trump has taken a series of actions that have shocked the market. Not only did he announce the dismissal of Federal Reserve Board member Koch, accusing him of involvement in mortgage fraud, but he also criticized Federal Reserve Chairman Powell for not cutting interest rates quickly enough. Trump claimed that the dismissal decision would take immediate effect, but Koch stated that he would resist, leaving the market uncertain about the final outcome. At the same time, Trump also dismissed Erika McEntarfer, the director of the US Bureau of Labor Statistics, this month, citing poor performance in the July employment report. Additionally, he pushed for the US acquisition of a 10% stake in Intel Corporation (INTC.US). These actions have led the market to draw parallels with government intervention patterns in countries like Turkey. The core of market concerns is that political risk in the United States is rapidly evolving towards "emerging marketization." Rosenberg explained that this trend refers to the process of increasing political uncertainty, policy volatility, and market instability, phenomena that were more common in emerging markets in the past. GeoQuant data shows that the current political risk score in the United States is 41.79, approaching the average of 44 for 28 emerging market countries, and not far from Turkey's 51.31. Since 2018, the correlation between US political risk and the yield on the 30-year US Treasury bond has been increasing. Meanwhile, since Trump announced massive tariff plans in April, the US dollar index has continued to weaken, reflecting the direct impact of political risk on exchange rates. Turkey is often cited as a cautionary example. Over the years, President Erdogan has repeatedly intervened in the central bank's interest rate decisions, leading to persistent high inflation and continuous depreciation of the lira. In July this year, the country's CPI rose 33.5% year-on-year, and the lira hit a historic low against the US dollar. Despite the US economy's far superior fundamentals to Turkey's, there is perceived convergence risk in their political paths. It is worth noting that despite rising political risk, the US stock market remains resilient. On Wednesday, the Dow Jones Industrial Average rose by 0.32%, the S&P 500 index closed up by 0.24%, reaching a new high, and the Nasdaq Composite Index rose by 0.21%. Rosenberg pointed out that the US stock market seems to be more immune to political uncertainty, and there is even a phenomenon of "higher risk, higher S&P 500." He analyzed that the diversification, scale, and depth of the US market continue to have strong appeal, as investors lack better alternative options. Although the US remains one of the most attractive investment destinations globally in the short term, market participants generally believe that Trump's interventions in the Federal Reserve, direct interference with statistical agencies and large technology companies have narrowed the distance between the US and emerging market risks. As Rosenberg said, "The US is moving faster towards Turkey, not Turkey moving closer to the US. This is a fact." However, he also emphasized that the US is unlikely to reach the extreme situation of losing central bank independence.