Late night, the screen is filled with red: Three market rescues, half successful

Source: Global Market Broadcast

What truly touches Trump's nerves is not a stock market decline, but the disorder of long-term US Treasury yields.

Monday was a very comfortable day, bringing together the market's favorite combination in one go:

Oil prices plummeted, easing inflationary pressure; US Treasury yields dropped, with the 10-year US Treasury yield falling below 4.7%, reducing valuation pressure;

Meanwhile, the US stock market rose across the board: Dow Jones Index up 1.32%, S&P 500 Index up 1.48%, Nasdaq Index up 2.13%.

Monday's rally can be viewed as part of last Thursday's market rescue measures. What we call a "market rescue" refers to the bond market, with the stock market rescued as a side effect.

Last Thursday, the 10-year US Treasury yield broke through 4.70%, closing at 4.74%—the highest level since January 2025. According to previous experience, every time this yield reaches an extreme level, it will subsequently be suppressed (accompanied by a change in Trump's action trajectory), and the US stock market will see a strong rebound. 4.70% is not a red line that automatically triggers a market rescue, but it increasingly looks like a line of political pressure.

Looking closely at several seemingly unrelated recent Trump actions, they all ultimately point to the bond market. For example, "suspending strikes against Iran" (this is the second rescue), leading to a sharp drop in oil prices, lowered inflation expectations, which then led to lower rate hike expectations, and ultimately cooled the rise in US Treasury yields, easing stock valuation pressure. Another example is the high-profile announcement that "US intervention in the yen exchange rate is a sign of friendship between two countries" (the third rescue), which in fact is helping himself avoid Japan selling US Treasuries to rescue the yen. Typically, Japan needs to sell US dollar assets and buy yen to support its currency, and Japan is one of the largest overseas holders of US Treasury bonds. Therefore, the market is naturally wary whether Japan's foreign exchange intervention is accompanied by the selling of US Treasuries.

However, the rescue measures are only half successful so far, and Monday revealed some "not quite comfortable" details:

Oil prices plunged over 7%, but the 10-year US Treasury yield dropped only a few basis points;

The US dollar fell sharply at the opening but then regained ground, moving again toward testing $100;

Although US stocks surged, semiconductors clearly lagged behind Nasdaq, and the momentum stock rebound began to stall.

The market has almost fully reacted to the existing good news, just as we said today:

On Monday, the market already answered the first question: Can the market rise when good news emerges?

Next, the market must answer the second question: Can the market continue to rise without further good news?

Next, the rescue action enters the second half, and even more bizarre events will happen. Next time you see Trump suddenly change his actions, it might be worth taking a look at the 10-year US Treasury yield first. The fire has been suppressed, but it has not yet gone out.