The Investment Insight: International oil prices have recently declined noticeably, with Brent crude futures falling back to around USD 100 per barrel and WTI crude stabilizing near USD 89 per barrel, cumulatively dropping 3.7% over the previous two trading sessions. The rebound in Middle East oil exports and the G7's commitment to release strategic reserves are the main drivers. However, the decline in oil prices has not led to a corresponding drop in long-term interest rates as in the past. Long-term bond yields in major global economies remain elevated, suggesting that the traditional linkage among "oil prices—inflation—interest rates" appears to be breaking down.
In the United States, the 10-year Treasury yield rose as high as 5.347% on October 1, reaching its highest level since April 2002; the 30-year yield climbed to 5.677%, marking eight consecutive days of increases. Japan's situation is equally severe: the Ministry of Finance announced a 3.1% coupon rate for its newly issued 10-year government bonds this month, the highest since August 1996; the 30-year bond yield even touched 4.235%, a record high, reflecting escalating investor concerns over Japan's deteriorating public finances. The UK and France are not far behind—UK 30-year bond yields rose above 6% for the first time since 1998, while France's 10-year yield approached the 5% threshold, hitting its highest level since 2002.
The divergence between falling oil prices and persistently high bond yields reveals a deeper structural issue. As market analysts point out, while rising oil prices are a visible factor pushing up bond yields, the continued rise in US Treasury yields during periods of two-way volatility in WTI crude suggests that structural factors—such as expanding government debt, worsening fiscal deficits, and rising borrowing costs—are the core drivers. These factors are weakening investors' appetite for government bonds and prompting them to demand higher risk premiums. Goldman Sachs has delayed its forecast for the next Federal Reserve rate hike from October to December, but the market still expects at least three more rate hikes over the next year, indicating that uncertainty over interest rate outlook remains far from resolved.
For global financial markets, long-term bond yields—acting as the "anchor of global asset pricing"—are transmitting pressure to various asset classes through three main channels: valuation, liquidity, and exchange rates. High-valuation growth assets are generally under valuation pressure. Hong Kong stocks began October by losing the 24,000 level, with the Hang Seng Index plunging 2.6% in a single day—the largest daily drop in nearly six months—pressuring both financial and tech stocks. Under the dual impact of high bond yields and the absence of northbound capital flows, Hong Kong's short-term weakness is unlikely to reverse soon, and the Hang Seng Index may next test support around 23,000. Although falling oil prices offer some relief to inflation expectations, the structural issues reflected by persistently high long-term yields are more worrisome—when the rise in the interest rate baseline stems not from short-term energy shocks but from long-term imbalances in government debt and fiscal discipline, the global asset valuation system faces deeper restructuring pressures. By Deng Shing-hing, Chairman of the Hong Kong Securities Analysts Association and Executive Partner at Ebo Capital Asia Limited
*Articles signed and/or unsigned published in ETNET are the authors' own opinions and do not represent ETNET's stance. ETNET's role is to provide a free platform for expression.
In the United States, the 10-year Treasury yield rose as high as 5.347% on October 1, reaching its highest level since April 2002; the 30-year yield climbed to 5.677%, marking eight consecutive days of increases. Japan's situation is equally severe: the Ministry of Finance announced a 3.1% coupon rate for its newly issued 10-year government bonds this month, the highest since August 1996; the 30-year bond yield even touched 4.235%, a record high, reflecting escalating investor concerns over Japan's deteriorating public finances. The UK and France are not far behind—UK 30-year bond yields rose above 6% for the first time since 1998, while France's 10-year yield approached the 5% threshold, hitting its highest level since 2002.
The divergence between falling oil prices and persistently high bond yields reveals a deeper structural issue. As market analysts point out, while rising oil prices are a visible factor pushing up bond yields, the continued rise in US Treasury yields during periods of two-way volatility in WTI crude suggests that structural factors—such as expanding government debt, worsening fiscal deficits, and rising borrowing costs—are the core drivers. These factors are weakening investors' appetite for government bonds and prompting them to demand higher risk premiums. Goldman Sachs has delayed its forecast for the next Federal Reserve rate hike from October to December, but the market still expects at least three more rate hikes over the next year, indicating that uncertainty over interest rate outlook remains far from resolved.
For global financial markets, long-term bond yields—acting as the "anchor of global asset pricing"—are transmitting pressure to various asset classes through three main channels: valuation, liquidity, and exchange rates. High-valuation growth assets are generally under valuation pressure. Hong Kong stocks began October by losing the 24,000 level, with the Hang Seng Index plunging 2.6% in a single day—the largest daily drop in nearly six months—pressuring both financial and tech stocks. Under the dual impact of high bond yields and the absence of northbound capital flows, Hong Kong's short-term weakness is unlikely to reverse soon, and the Hang Seng Index may next test support around 23,000. Although falling oil prices offer some relief to inflation expectations, the structural issues reflected by persistently high long-term yields are more worrisome—when the rise in the interest rate baseline stems not from short-term energy shocks but from long-term imbalances in government debt and fiscal discipline, the global asset valuation system faces deeper restructuring pressures. By Deng Shing-hing, Chairman of the Hong Kong Securities Analysts Association and Executive Partner at Ebo Capital Asia Limited
*Articles signed and/or unsigned published in ETNET are the authors' own opinions and do not represent ETNET's stance. ETNET's role is to provide a free platform for expression.
