This Week's Market "Surprise": US Treasury Yields and Tech Stocks and Bonds Rise Together

While US Treasury yields jumped sharply, tech stocks and credit bonds rebounded in tandem. This "anomalous resonance" breaks the market's traditional expectation that high rates suppress risk assets, and also leaves investors doubtful about whether this combination can persist. According to Wind Trading Desk news, on November 13, Nomura strategist Naka Matsuzawa pointed out in a research report that the rebound in tech stocks is more likely just a technical recovery after a prior sharp decline, and confidence that AI investment returns can cover current interest rate levels has not actually been rebuilt. Analysis suggests that the sustainability of this combination will be the core issue for the market in the coming week. If Fed officials fail to correct the market's overpricing of consecutive rate hikes, financing pressure on tech companies may re-emerge, and at that point the simultaneous rise in stocks and bonds may be difficult to sustain. Biggest surprise this week: rate hike expectations and tech stocks rising "abnormally" together Nomura summarized two contradictory phenomena in this week's market: First, expectations for Fed rate hikes heated up sharply. The direct trigger was the stronger-than-expected upside in US CPI data, and Fed Governor Waller subsequently made hawkish remarks publicly supporting a one-time 50 basis point rate hike, further pushing market expectations higher. As a result, the market not only pushed the implied probability of a December rate hike to 111%, already implying some possibility of a 50 basis point hike, but also priced the probability of hikes at three consecutive meetings (through March next year) at about 80%. This tightening pace has exceeded market expectations before the risk aversion triggered by the tech sector in early October. Second, tech stocks and credit bonds rebounded sharply in tandem. Although soaring yields are usually regarded as a "natural enemy" of tech stocks, tech stocks this week rose strongly against the trend. In this regard, Naka Matsuzawa pointed out that there are two interpretations: The optimistic explanation is that the market had already fully digested various risks during the earlier decline, such as financing difficulties, circular transactions, business obstacles, and excessive competition, and investors have regained confidence in AI investment, believing that its expected returns are sufficient to cover current interest rate levels; The pessimistic explanation is that this is merely a technical rebound after the previous sharp drop. Naka Matsuzawa explicitly stated that he believes the latter is closer to the truth. The implication of this judgment for investors is that if the Fed does not step in to correct excessive rate hike expectations, financing pressure on tech companies will sooner or later re-emerge. Bond market: rate hike expectations already priced ahead, watch dovish officials' remarks The bond market suffered a broad shock this week. The 10-year US Treasury yield posted the largest weekly increase, rising 25 basis points, followed by Japan up 16 basis points, the UK up 15 basis points, and Germany up 9 basis points. The yield curves of the US, UK, and Germany showed a "bear flattening" pattern, while Japan showed "bear steepening." Real yields rose across all G4 economies, and inflation expectations widened in all regions except Japan. (30-year JGB yield and yield curve) In terms of expected terminal policy rates, the US jumped from 4.24% at the end of last week to 4.55%, the euro area edged up from 3.17% to 3.19%, and Japan rose from 2.05% to 2.26%. (G3 policy rate expectations) Nomura believes that the next core focus in the bond market lies in the direction of remarks from relatively dovish Fed officials: If their stance turns hawkish, expectations for consecutive rate hikes will persist; If they emphasize tightening financial conditions or the financing fragility of the tech sector, rate hike expectations may cool. In addition, the report also mentioned that the recent weakness of the yen is mainly driven by dollar strength rather than problems in the yen itself. EUR/JPY has fallen from a high near 186 in early September to about 176, the lowest level since October 2025. Against this backdrop, Japanese authorities have very limited room and willingness to intervene in the foreign exchange market. The research report points out that the next turning point for USD/JPY is most likely to appear when Fed rate hike expectations recede. Stock market: whether the tech rebound can continue, non-tech sectors unlikely to take over Global stock markets rose broadly this week, with Japan posting the largest gain, up 6.2%, followed by the US up 3.0%, Europe up 2.4%, and emerging markets up 4.9%. Within the US stock market, the semiconductor sector's SOX index surged 11.4%, hyperscale cloud computing rose 2.8%, software stocks rose 0.1%, and small/mid-cap Russell 2000 index rose 1.8%. However, Nomura is cautious about the outlook, because the logic of this tech-sector rotation does not hold. The research report noted that during the period of rising yields, consumer-related sectors and real estate stocks weakened, indicating that the positive cycle of "economic recovery + rising yields + capital rotation into non-tech" has not started. For next week, Naka Matsuzawa gave a clear scenario judgment: If tech stocks pull back without yields falling, the rotation effect into non-tech sectors will not be enough to offset an overall decline; If yields do fall, tech stocks may be supported, but this scenario is likewise unfavorable for capital inflows into non-tech sectors. Under both scenarios, the overall stock market faces headwinds. His baseline forecast for next week is: stocks flat, bonds stronger, dollar softer, yen stronger. This article is reprinted from Wall Street See, GMTEight editor: Li Fo.