Core Viewpoint - China Galaxy Securities provides an outlook for U.S. Treasury yields in Q4, emphasizing the importance of the Federal Reserve's interest rate decisions following the initiation of rate cuts in September. The current economic environment presents a trade-off between preventing excessive economic downturns and managing inflationary pressures, leading to uncertainty in the pace and magnitude of future rate cuts [2][3]. Group 1: Interest Rate Scenarios - Neutral Scenario: If the unemployment rate rises to the range of 4.4%-4.6% and core PCE inflation remains below 2.9%-3.1%, the Fed has a remaining rate cut space of 25-50 basis points (BP), allowing for 1-2 additional cuts of 25 BP each. The potential range for the 10-year Treasury yield is projected to be 3.8%-4.3% [2]. - Downside Employment Risk Scenario: If the unemployment rate accelerates above 4.6% and average non-farm payrolls drop below 30,000, the economy may face recessionary pressures, prompting the Fed to adopt a more aggressive easing policy. The remaining rate cut space would be 50-75 BP, allowing for 2 additional cuts of 25-50 BP each. Coupled with increased safe-haven flows into Treasuries, the potential range for the 10-year Treasury yield is estimated at 3.5%-3.8% [2]. - Inflation Rebound Scenario: If inflation accelerates due to structural and external shocks (core PCE surpassing 3.1%) while the labor market shows no significant improvement (unemployment at around 4.5%), the risk of stagflation increases. The Fed would likely adopt a hawkish stance with a remaining rate cut space of 0-25 BP, allowing for at most one additional cut. This scenario could lead to a return to an upward trend in the 10-year Treasury yield, with a potential range of 4.3%-4.7% [3]. Group 2: Market Influences - The potential early announcement of the next Federal Reserve Chair and their monetary policy stance, along with market concerns regarding the Fed's independence, may cause disturbances in Treasury yields [3].