Skyrocketing! US Treasury yields continue to rise, with the 10-year rate reaching 4.339%.

US long-term treasuries experienced significant selling in August, initially due to concerns about fiscal prospects and now due to expectations that US interest rates may not return to the lows of the past decade.

According to Dolphin Research APP, investors and traders continued to sell US treasuries on Monday, pushing the yield on 10-year US bonds to 4.339%, the highest level since November 6, 2007. The yield on 30-year US bonds rose to 4.455%, the highest closing price since April 27, 2011. The rise in bond yields is widely seen as the main reason for the stock market decline in August, with the S&P 500 index falling 4.1% this month.

The market is trying to understand higher and longer-lasting interest rates and adjust expectations for the next decade, as Robert Daly, Director of Fixed Income at Glenmede Investment Management, said, "The era of low interest rates of the past decade is over. We will face a higher interest rate trajectory, and the market is adjusting to the fact that the data is better, the economy is fine, although inflation is falling, it has not yet reached the Fed's target of 2%."

Daly pointed out that the market is grappling with two major issues: a significant increase in US government debt supply and the possibility that the Jackson Hole Economic Symposium could disrupt expectations of how much the Fed will stop raising interest rates and when officials may start cutting rates.

The theme of this year's Jackson Hole Economic Symposium in Wyoming is "Structural Transformation of the Global Economy." Derek Tang, an economist at Washington Monetary Policy Analysis, pointed out that this theme gives Fed Chairman Powell the opportunity to discuss the risks of rising long-term neutral real interest rates, telling the market that the Federal Open Market Committee "is serious about maintaining higher rates for a longer period of time."

Rising US deficits and stronger-than-expected US economic growth may be factors contributing to the rise in neutral interest rates. Although the federal funds rate target is now at its highest level in 22 years, at 5.25%-5.5%, it may not be enough to adequately slow down economic activity and counter inflation.

On Monday, yields on US treasuries from 2-year to 30-year maturities all closed at higher levels, intensifying the selling pressure on US government debt. Meanwhile, most US stocks closed higher.

Daly said, "The market is trying to adapt to the future reality, and I don't think anyone knows." He expects a 50% chance of another rate hike by the Fed in November, and the first rate cut may occur in mid-2024 as long as the labor market experiences a downturn or slowdown.

The rise in long-term yields helps the Fed accomplish part of its work by tightening financial conditions. However, Daly said the Fed "recognizes" the potential impact on risk assets and "doesn't want to do too much to make the landing more difficult."