Core Viewpoint - The U.S. Treasury bond market is experiencing a sell-off of long-term bonds despite high expectations for a Federal Reserve rate cut in September, indicating concerns over long-term inflation and debt issues [1][2][3] Group 1: Market Dynamics - On September 3, the 30-year U.S. Treasury yield reached a high of 5%, the highest since July, while the 10-year yield hit 4.3% [1] - Market expectations for a Federal Reserve rate cut in September reached 97.4% as of September 4, typically leading to lower bond yields; however, yields are rising instead [1][2] - Seasonal factors contribute to the sell-off, as September is a peak month for corporate bond issuance, diverting funds away from Treasury bonds [1][2] Group 2: Inflation and Debt Concerns - The rise in long-term bond yields reflects market worries about long-term inflation and U.S. debt risks, despite expectations for a Fed rate cut [2][3] - The latest Federal Reserve Beige Book indicates price increases related to tariffs, with companies passing on costs to customers, suggesting continued inflationary pressures [2] - The U.S. Treasury is expected to issue $1 trillion in net debt in Q3, with approximately $470 billion in long-term bonds, increasing supply and raising yield expectations [3] Group 3: Future Outlook - The Federal Reserve is likely to restart rate cuts in September, with market pricing indicating two cuts by year-end; however, long-term yields may remain constrained due to inflation and debt concerns [4] - If the Fed signals a cautious approach to rate cuts, bond yields may face upward pressure, especially if corporate bond issuance exceeds expectations in mid to late September [4] - Short-term yields are expected to decline in line with policy rates, while long-term yields may not decrease significantly due to ongoing inflation and debt issues [4]