The U.S. debt crisis is temporarily relieved but far from over: the Treasury Department intervenes to stabilize the market, while investors bet on the 10-year yield breaking 5%.

The U.S. Treasury market has recently faced continued selling pressure, resulting in a steady rise in long-term yields. After the 30-year Treasury yield climbed to its highest level in nearly 20 years, investors expect the 10-year Treasury yield could also break through a significant threshold. Media surveys indicate that about two-thirds of respondents believe the 10-year Treasury yield will exceed 5% before the end of this year. A total of 392 market participants were surveyed. Among them, 38% expect the 10-year yield to surpass 5% in the fourth quarter, while another 28% believe this level could be reached as early as August or September. Meanwhile, the proportion of respondents anticipating a further rise in the 10-year yield over the next month has also reached its highest level in nearly four years, reflecting a growing concern in the market regarding the increasing long-term financing costs in the U.S. As of Wednesday's early New York trading, the 10-year Treasury yield was about 4.65%, down from a high of 4.75% reached earlier this week. This drop followed an unexpected announcement by the U.S. Treasury to expand its repurchase program for long-term Treasury securities, prompting a rebound in long-dated Treasuries. The Treasury stated it would at least double the size of its buyback operations for bonds with maturities of 10 to 30 years. The market widely views this move as the Treasury's response to the rapid rise in long-term yields. In the past 19 years, the 10-year Treasury yield has only temporarily exceeded 5%, most recently in October 2023, when the S&P 500 index was undergoing a correction. Currently, the 30-year Treasury yield remains around 5.20%. However, the survey shows that nearly 60% of respondents believe the 30-year yield will not rise further to 6% this year. The increasing concern among investors about rising U.S. Treasury yields stems mainly from multiple overlapping pressures. The conflict in the Middle East has driven up energy costs, making U.S. inflation more persistent; there is still uncertainty in the market regarding the Federal Reserve's monetary policy path; at the same time, the U.S. federal debt is approaching $40 trillion, raising concerns over fiscal sustainability. The surge in corporate financing demand driven by the AI investment boom is also becoming a new source of pressure on the Treasury market. As large tech companies issue a significant amount of bonds to build AI data centers and computational power infrastructure, competition for investor funds between corporate bonds and U.S. Treasuries has intensified. So far this year, the issuance of investment-grade corporate bonds in the U.S. has approached $1.5 trillion, a year-on-year increase of 36%. Nomura estimates that the approximately $200 billion in borrowing from large tech companies this year accounts for about 25% of the net issuance of mid- to long-term Treasuries aimed at private investors, a proportion that is about five times that of 2025. Survey participants also expressed clear concerns about the interplay between financing by AI giants and the Treasury market. Some investors worry that continued bond issuance by large tech companies will divert funds that would otherwise flow into U.S. Treasuries; others fear that rising Treasury yields will increase financing costs for tech companies. This could create a reinforcing feedback loop between the two. Fiscal issues remain one of the market's core long-term concerns. More than three-fifths of respondents believe that even if there are significant changes in U.S. economic growth or inflation, it will be challenging to substantially reduce the government debt-to-GDP ratio, and they feel the U.S. fiscal situation may continue to worsen, potentially leading to more severe problems. Ruben Hovhannisyan, a fixed income portfolio manager at TCW Group, stated that given the difficulty of achieving effective improvement in the U.S. fiscal situation and heightened volatility in the bond market, he is not optimistic about long-end yields on the curve. Therefore, he prefers to hold short-term U.S. Treasuries over long-term bonds at present. The market remains cautious about whether the Treasury's expansion of buybacks can reverse the trend of long bond selling. Macro strategist Cameron Crise believes this move clearly indicates that the Treasury is concerned about and monitoring the rise in long-end yields, but merely increasing the buyback size is insufficient to reverse the ongoing sell-off in long-term Treasuries. However, this policy signal may prompt some shorts to cover their positions. Additionally, although Treasury yields have surged, the overall performance of the U.S. dollar has remained flat this year. Most survey participants believe there is not a straightforward yield level that, once surpassed, would necessarily lead to a decline in the dollar; the dollar's movement is more reliant on the pace of bond selling and changes in real yields. It is noteworthy that over 60% of respondents indicated that the U.S. government's previous willingness to assist Japan in stabilizing the yen has heightened their concerns about the U.S. Treasury market. Japan remains the largest foreign holder of U.S. Treasuries, and any shift in the willingness of major overseas buyers to allocate to Treasuries could further influence the supply-demand dynamics of long-term Treasuries.