On January 7, the Financial Association reported (edited by Xiaoxiang) that as the new year begins and market participants speculate how many more times the Federal Reserve can cut interest rates, a scene unfolding that worries many cross-asset market traders is still ongoing: the yield on long-term US Treasuries has not stopped its march towards 5.

On Monday, the yields on US Treasuries of various maturities rose again, with the yield on the 30-year Treasury increasing by 3.8 basis points to 4.855%, briefly touching a high of 4.861%, the highest since November 2023.

The 10-year US Treasury yield, known as the "anchor of global asset pricing," also reached 4.64% during trading on Monday, marking the highest level since May. Since December, the 10-year Treasury yield has accumulated an increase of about 50 basis points, and is now less than 10 basis points away from the peak reached in April last year.

One of the reasons pushing long-term Treasury yields further up is supply pressure, as the first round of US Treasury auctions this week saw weak demand, and a large amount of high-rated corporate bonds are competing for the cash in investors' hands.

On Monday, the US Treasury sold $58 billion in 3-year Treasuries, with overall demand sluggish—the winning yield was 4.332%, which is 1 basis point higher than the yield in the secondary market prior to auction, and the bid-to-cover ratio was 2.62 times. The US Treasury will also auction $39 billion in 10-year Treasuries on Tuesday and $22 billion in 30-year Treasuries on Wednesday. Due to the state funeral for former US President Jimmy Carter on Thursday, the auction days for these two Treasuries are a day earlier than normal.

Gregory Peters, co-CIO of fixed income at PGIM, stated in an interview that there is an abundance of bonds in the market, and supply continues unabated. Coupled with the possibility that inflation could be stickier or turn to rise, these factors are putting pressure on the bond market.

Will Compernolle, a macro strategist at FHN Financial, noted that "there is great uncertainty about what will happen after the inauguration of the new president. What impact will this have on Treasury issuance? I don't think anyone can truly determine what the net impact will be, but the upside risk for yields is much greater."

Due to concerns that Trump's policies after taking office will push inflation higher, U.S. Treasury prices have been under pressure in recent weeks. On Monday, after The Washington Post revealed that Trump's aides were considering narrowing the tariff plan, the dollar experienced a significant drop intraday, helping U.S. Treasuries recover some ground, as the market believed this would alleviate inflation worries. However, after Trump denied this, the market trend quickly reversed.

Federal Reserve Governor Cook also stated on Monday that given the strong job market and persistent inflationary pressures, policymakers can act more cautiously regarding interest rate cuts.

Institutions: The yield on the 10-year Treasury bond could reach 5.5% this year.

With the further rise in U.S. Treasury yields, many of Wall Street's largest bond bears are evidently performing well at the start of the new year, as the market trend continues to align with their strong non-mainstream predictions.

Padhraic Garvey, head of Global Debt and Rates Strategy at ING Groep, recently predicted that the yield on the 10-year U.S. Treasury bond would rise to around 5.5% by the end of 2025. This is one of the most pessimistic forecasts within the industry regarding the prospects for U.S. Treasuries.

It is worth mentioning that among 51 predictions compiled within the industry regarding the year-end performance of U.S. Treasuries, only three predict that yields will rise from current levels, and ING's prediction is the most pessimistic, exceeding the second-ranked prediction by about 40 basis points.

Garvey stated, "I do not intend to revert to consensus forecasts. Testing 5.5% for the 10-year Treasury yield is reasonable."

Clearly, Garvey's prediction is based on the expectation that the Federal Reserve will maintain restrictive interest rates to offset the price pressures posed by President-elect Trump's tariff and tax cut policies, as well as investor concerns regarding the federal deficit.

If Garvey's prediction is correct, then it will undoubtedly be another disappointing year for bond investors. Despite the Federal Reserve's last three meetings resulting in a total rate cut of 100 basis points, bond investors will only see modest gains in 2024. Since the end of the long bull market in bonds in 2021, U.S. Treasury bonds have been unable to escape the mire.

Apart from ING Groep, the investment management company T. Rowe Price also predicted that the yield on 10-year U.S. Treasury bonds will reach 5% in the first quarter of 2025, and even hinted that it could ultimately rise to 6%.