Citadel Securities: Surge in US Treasury Yields Reflects Fed Policy Risk

BlockBeats News, August 18th, Citadel Securities stated that the Federal Reserve's monetary policy path after a period of high inflation continues to drive long-term bond yields to multi-year highs, bringing about broader market risks.

Citadel Securities' Head of Fixed Income Sales for Europe, the Middle East, and Africa (EMEA), Nohshad Shah, said in a client report that despite a 175 basis point drop from the peak in policy rates, long-term U.S. bond yields are still at their highest level in nearly 20 years. Shah wrote, "In my view, this reflects the market's belief that when the Federal Reserve and the Treasury face difficult choices, they tend to lean towards a more accommodative path. As long as this situation persists, it will continue to be a broader market risk."

The U.S. 30-year bond yield rose above 5.28% on Monday, hitting a new 19-year high. Previously released data indicated a cooling in inflation and consumer demand, but the bond market has reduced expectations of a Fed rate cut in September as a result.

Shah cautioned against viewing recent improvements in inflation and weakening job market signals as signs of an impending rate cut. He pointed out that over 55% of core commodity prices are still rising, so the Fed's policy meeting next month will still be a "balanced contest." Regarding artificial intelligence, Shah stated that AI investment logic is shifting from developing more advanced models to cloud infrastructure. Major cloud service providers such as Microsoft and Google will be better positioned to commercialize AI with computing power, inference capabilities, and distribution channels, potentially offering clearer returns than cutting-edge AI model developers like OpenAI and Anthropic.