At the dawn of the new year, one of the most prominent trends observed in the global market has undoubtedly been the ascent of the American long-term bond yield, with many analysts and investors keenly watching it approach the 5% markFollowing a continuous decline in U.STreasury prices, the market has become increasingly attentive to the fluctuations within this sector, with various institutions on Wall Street delving into interpretations of the shifting dynamics and reasons behind this fall.

Notably, U.STreasury Secretary Janet Yellen entered this discourse recently, providing her insights amidst the ongoing market evaluationsAs a seasoned veteran and former chair of the Federal Reserve, her perspective on the plunging U.S. bonds carries significant weight, prompting question about how she views this volatile situation.

In an interview, Yellen attributed the recent downturn in U.STreasury yields to the stronger-than-expected economic data which has shifted market expectations regarding interest rates. "When we see robust data—indicators of economic performance exceeding expectations—it suggests that future interest rate paths may be slightly higher than previously anticipated," she commented on the factors influencing the slide in U.S. bonds over recent weeks.

This assertion was corroborated during a notable sharp decline in U.S. bond values earlier this weekThe release of impressive non-manufacturing PMI and labor market data left traders reconsidering their assumptions about a potential rate cut by the Federal Reserve before the end of July.

On Wednesday, the yield on the 10-year U.STreasury bond surged to approximately 4.73%, marking the highest level since April of the previous yearHowever, it slightly moderated by the end of trading, registering a minimal increase of 0.8 basis points to close at 4.696%.

Additionally, Yellen highlighted that the term premium—a measure of the extra yield investors require for holding long-term bonds rather than continually investing in short-term securities—has begun to normalize

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Following a prolonged period of low levels, the term premium is now rising due to the consistent positive performance of the economy.

As the U.S. grapples with a complex economic landscape characterized by fluctuating inflation rates, the Federal Reserve's attempts to combat inflation have proven to be slow in pace, with noted little substantial success thus farYet, Yellen maintains a resolute outlook, expressing confidence that inflation pressures are easing, with current price hikes entering a downward trend and the labor market exhibiting stability—not driving inflation higher.

She further articulated her hope that the incoming administration takes serious heed of America's fiscal deficit, emphasizing a desire to avoid a situation reminiscent of the "bond vigilantes" phenomenon of decades past, wherein investor apprehensions over government borrowing compelled them to demand higher yields for U.STreasury bonds.

In recent statements, Yellen has taken a heartfelt tone, cautioning against the advanced complications that may arise if the situation deteriorates towards an influx of "bond vigilantes." In today’s interconnected global economy, investors worldwide are closely scrutinizing the U.S., hoping for responsible management of fiscal policy that skillfully balances income and expenditures instead of passively responding to market volatility.

At the center of this discussion are budget cuts aimed at curbing the deficit, a notion championed by Treasury Secretary nominee BementHowever, Yellen has expressed skepticism about the potential for significant cuts outside of defense and welfare sectors. "It is difficult to see how this plan will work," she remarked.

Interestingly, while Yellen refrained from explicitly critiquing the new administration’s proposed policy agenda, many experts still believe that the sharp rise in Treasury yields over recent months bears a direct link to their implicationsNobel laureate Paul Krugman opined in a recent article titled "Do Interest Rates Have a Crazy Premium?" that the increase in long-term rates, including the 10-year Treasury yield, might manifest a troubling, slowly spreading skepticism—one that reinforces the belief in reckless economic statements made by the incoming administration.

Krugman queried whether the markets are reacting to the president-elect's aggressive tariff statements

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