Economic Impact - The ongoing government shutdown has the potential to negatively impact overall economic growth, with the Congressional Budget Office estimating a decrease in the annual GDP growth rate by 1 to 2 percentage points in Q4 2023, translating to a loss of $7 billion to $14 billion depending on the duration of the shutdown [4][6] - Consumer confidence is expected to be directly affected, as federal employees face delayed wages and contractors experience payment delays, which could impact the traditional holiday shopping season if the shutdown persists [4][6] - The shutdown has already caused significant disruptions in various sectors, including aviation, with over 3.2 million travelers affected by flight delays or cancellations since the shutdown began [3][4] Aviation Sector - Approximately half of the major air traffic control facilities in the U.S. are experiencing staffing shortages, particularly in the New York area where nearly 90% of air traffic controllers are absent [3] - The Department of Transportation has warned that if the shutdown continues, it may have to close certain airspaces due to staffing and safety pressures, potentially leading to longer wait times at airports during the busy Thanksgiving travel season [3][4] Healthcare and Food Assistance - The shutdown has halted the distribution of funds for the Supplemental Nutrition Assistance Program, affecting over 40 million Americans, with emergency funds being utilized to cover only part of the month's assistance [3][4] - The inability to pass a temporary funding bill has led to significant increases in health insurance premiums, with estimates suggesting an additional $1,000 per year for individuals without government subsidies [2][4] Political Stalemate - The political deadlock between the Republican and Democratic parties continues, with no clear resolution in sight, as both sides appear to be using the shutdown as a political tool rather than seeking a compromise [7][8] - Recent attempts to advance a temporary funding bill have failed to secure the necessary votes, indicating a deepening divide and a lack of urgency to resolve the crisis [7][8]

Core Points - The Federal Reserve announced a 25 basis point reduction in the federal funds rate target range to between 4.00% and 4.25%, marking the first rate cut of 2025 and following three cuts in 2024 [1] - The decision was influenced by indicators showing a slowdown in economic activity, job growth, and a rise in inflation [1] - Fed Chairman Jerome Powell emphasized the focus on the labor market and the challenges of balancing rising inflation with a weakening job market [1] Economic Forecasts - The median forecast for the U.S. real GDP growth rate for 2025 is 1.6% [2] - The median forecast for the unemployment rate is 4.5% [2] - The median forecast for the inflation rate is 3% [2] Market Reactions - Following the rate cut, U.S. stock markets closed mixed, the dollar index fell before rebounding, and gold prices experienced fluctuations [3] - Analysts predict a total of 75 basis points in rate cuts by the end of the year and an additional 125 basis points in 2026 [3] - Economic risks are highlighted, with concerns about the reliability of U.S. sovereign credit rather than private debt [3]

Core Points - The Federal Reserve announced a 25 basis point cut in the federal funds rate, bringing it to a target range of 4.00% to 4.25%, marking the first rate cut of 2025 and following three cuts in 2024 [1] - The decision was influenced by slowing economic activity, job growth, and rising inflation, with the Fed indicating a careful assessment of future data and economic risks [1] - Fed Chairman Jerome Powell emphasized the focus on the labor market, stating that lowering rates could assist those struggling to find jobs [1] Economic Forecasts - The median forecast for the U.S. real GDP growth rate for 2025 is 1.6%, with an unemployment rate forecast of 4.5% and an inflation rate forecast of 3% [2] Market Reactions - Following the rate cut, U.S. stock markets showed mixed results, the dollar index fell before rebounding, and gold prices experienced fluctuations [3] - Analysts predict a total rate cut of 75 basis points by the end of the year and an additional 125 basis points in the following year [3] - Economic concerns were raised regarding the potential trust crisis in U.S. government credit, rather than private debt, as a result of the rate cut [3]

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - The significant fluctuations in US Treasury bonds are due to the structural contradictions in the US Treasury market, leading to intensified supply - demand imbalances. The recent upward inflation expectations in the US and the repricing of Fed policies have also driven the re - evaluation of risk premiums [9]. - The US Treasury storm may lead to higher financing costs and uncertainty, inhibiting the expansion momentum of the US economy and restricting the scope of monetary policy. The increased volatility of US Treasuries exacerbates the fragility of the financial system, and the weakening of the safety of US Treasuries potentially impacts the international status of the US dollar and may accelerate the reconstruction of the global monetary and financial order [9]. - The probability of this Treasury bond fluctuation triggering a systemic risk is low, but attention should be paid to the impact of Treasury bond trends on the US sovereign credit level [12]. Summary by Relevant Catalogs 1. Basic Characteristics and Importance of the US Treasury Market - The US Treasury market is the world's largest and most liquid bond market, a core tool for US fiscal policy and the cornerstone of the global financial system. As of the end of Q1 2025, the outstanding balance of US federal government debt exceeded $36.2 trillion, equivalent to about 125% of GDP. The average daily trading volume has exceeded $630 billion [13]. - It is the anchor of the global financial system. The US Treasury yield (e.g., 10 - year) is the "risk - free interest rate" reference for global asset pricing, and US Treasuries are recognized as safe - haven assets [13]. - It is based on the pillar position of the US dollar in the international monetary system. The US dollar accounts for about 59% of global foreign exchange reserves, making US Treasuries an important part of central banks' foreign exchange reserves [13]. - It is crucial for US fiscal sustainability and the stability of the global financial market. The low financing cost of US Treasuries is key to US fiscal sustainability, and the stability of the Treasury market is vital for global economic and financial stability [14]. 2. Reasons for the Upward Movement of US Treasury Yields (1) Rising Fiscal Financing Demand and Continued Long - term Supply Pressure - In Q1 2025, US fiscal financing demand remained high. As of April 1, 2025, the total federal government debt exceeded $36.2 trillion. The CBO predicts that the budget deficit in fiscal year 2025 will exceed $2 trillion again, accounting for nearly 7% of GDP. The Treasury may gradually increase the issuance scale in the second half of 2025 [15][16]. (2) Upward Inflation Expectations and Fed Policy Repricing Driving Risk Premium Re - evaluation - On April 2, 2025, the Trump administration announced a "reciprocal tariff plan", which is expected to significantly increase import prices and exacerbate imported inflation risks. Multiple think - tanks warn that if major economies take reciprocal counter - measures, the US inflation center may rise by 1.5 - 2 percentage points. This may lead to greater uncertainty in the Fed's monetary policy path [18]. (3) Declining Demand for US Treasuries Leading to Insufficient Market Liquidity and Reduced Trading Depth - In recent years, the liquidity of the US Treasury market has declined. In March 2025, the US capital market fluctuated significantly, and investor confidence weakened. In April 2025, the liquidity indicators of the Treasury market continued to deteriorate, and the bid - ask spread of 10 - year and 30 - year Treasuries reached the highest level since the 2020 "flash crash". Market orders dropped by more than 40% [19]. 3. Potential Impacts and Risks of the Upward Movement of US Treasury Yields (1) The US Treasury Storm Increases Financing Costs and Uncertainty, Inhibiting US Economic Expansion and Restricting Monetary Policy Space - Rising yields directly increase the financing costs of the US real economy. In April 2025, the 30 - year mortgage rate exceeded 7.25%, and the residential transaction volume decreased by about 12% month - on - month. The nominal financing rate of mid - investment - grade corporate bonds exceeded 5.8%, and some capital expenditure projects were postponed [21]. (2) Increased Volatility of US Treasuries Exacerbates the Fragility of the Financial System and Amplifies Systemic Financial Risks at Home and Globally - The significant increase in US Treasury yields is causing a wide - scale re - evaluation of the balance sheets of the financial system, increasing the vulnerability of domestic financial institutions and amplifying global financial stability risks through cross - market linkages. In April 2025, emerging market bond ETFs had a net capital outflow of over $4 billion in the first two weeks [23][25]. (3) The Weakening of the Safety of US Treasuries Potentially Impacts the International Status of the US Dollar and May Accelerate the Reconstruction of the Global Order - The US Treasury market's weakening liquidity and increased volatility are eroding the traditional safe - haven perception of US Treasuries. The issue of US fiscal sustainability is becoming more prominent, which is eroding the credit foundation of the US dollar and may accelerate the shift of international reserve asset allocation to a multi - currency system [26]. 4. Future Scenario Analysis of US Treasury Trends (1) Baseline Scenario (60% Probability): Policy Tends to be Restrained, and the Market Restores Limited Stability - The Trump administration shows some policy convergence after market fluctuations, and the Fed maintains its independence and gradually releases easing signals. In the short term, US Treasury yields may remain at a relatively high level, but the sharp upward trend will slow down, and volatility is expected to converge. In the medium term, if policy stability improves and the Fed gradually cuts interest rates, Treasury yields are expected to decline [28][30]. (2) Risk Scenario (30% Probability): Radical Tariff Policies Lead to a Sharp Rebound in Inflation, Policy Re - tightening, and a Significant Increase in US Treasury Risks - If the US imposes comprehensive tariffs and global energy and commodity prices rise, inflation may rise above 3%. The Fed may be forced to postpone interest rate cuts, and the US economy's "stagflation" expectations will be strengthened. Both short - term and long - term Treasury yields face upward pressure [31]. (3) Crisis Scenario (10% Probability): In Extreme Situations, the Trump Administration Continues to Take Radical Policies and Puts Pressure on the Fed, Leading to Monetary Policy Chaos and a Financial Crisis - If the Trump administration promotes high - intensity fiscal expansion and trade protection measures, and the Fed loses its policy independence, it may trigger a liquidity crisis. The 10 - year yield may soar irrationally, and the US financial system may face a serious systemic financial crisis [32].