The Federal Reserve's interest rate hikes have become the biggest source of instability in the global financial market at present.

In the just-concluded month of October, all three major U.S. stock indices rose, primarily due to predictions that the Federal Reserve's interest rate hikes would slow down. There was a consensus that the U.S. would raise interest rates by 75 basis points, but now it has been discovered that the U.S. interest rate hike might be reduced by 25 basis points compared to the previous months, which the market has interpreted as positive news.

However, despite the rebound in U.S. stocks, the future of U.S. Treasury bonds remains pessimistic. The international investment bank, Morgan, still predicts that there is room for U.S. Treasury bonds to fall, and the yield on the ten-year bonds could rise again, potentially reaching 5% by the middle of next year.

From this perspective, the short-term rise in U.S. stocks is also unstable.

If U.S. Treasury bonds do experience a significant increase in yields, it is believed that the U.S. could see a new round of declines.

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01, U.S. Stocks

The market is now waiting for the Federal Reserve to announce the extent of the interest rate cut in November.

Last night, all three major U.S. stock indices fell, but it did not change the overall rise in U.S. stocks for the month of October.

Looking at a single month, the Dow Jones Industrial Average performed the best, with a cumulative increase of 13.95% in October, which is the best October performance in history, and this monthly gain also ranks among the best records since 1976.

However, due to the significant decline in the Dow Jones Industrial Average earlier, it still has a cumulative decline of 9.92% from the beginning of the year to now.Compared to the Nasdaq Index, it's already much better. Since the beginning of this year, the Nasdaq Index has still fallen by 29.77%, and at the deepest point of the decline, it even approached 35%.

Regardless of how November and December will perform, the Nasdaq Index's decline this year is almost certain to become the largest annual drop since 2009.

In 2008, when the subprime mortgage crisis occurred, the Nasdaq Index fell by 40.54% in a year. In other words, if there is a further decline in the next two months, the Nasdaq Index's decline this year could even exceed that of 2008. If so, the Nasdaq Index would create the largest annual drop in 50 years.

02, U.S. Treasury Bonds

Whether the Nasdaq Index will continue to decline, the trend of U.S. Treasury bonds is a very important reference standard.

At present, U.S. Treasury bonds have become the target of common sales by many central banks around the world. The overseas central banks with the most U.S. Treasury bonds are Japan and China, which have been in a net selling state throughout the year.

And the central bank with the most U.S. Treasury bonds in the world is the United States itself. The Federal Reserve began to shrink its balance sheet in June this year, which means that even the Federal Reserve has begun to剥离 U.S. Treasury bonds from its balance sheet, leading to a continuous decline in the price of U.S. Treasury bonds.

Moreover, due to the continuous decline in the price of U.S. Treasury bonds and the small market support, the liquidity of U.S. Treasury bonds has dried up, which has also caused great concern for the U.S. Treasury. Yellen even stated that the Treasury needs to consider repurchasing U.S. Treasury bonds.

In just these days, J.P. Morgan Asset Management also stated that there is still room for further decline in U.S. Treasury bonds. With the Federal Reserve's interest rate hikes, the yield on 10-year U.S. Treasury bonds could be further increased to 5%.

Since the beginning of this year, the total return index of U.S. Treasury bonds has fallen by 13%, and the 10-year Treasury bond index has also fallen by more than 15%.When the U.S. Treasury issues Treasury bonds, although it uses future national income as collateral, in the past 20 years, the U.S. fiscal revenue has only had a slight surplus for four years, and for most of the other years, it has been unable to cover its expenses.

Under these circumstances, the so-called guarantee of U.S. debt credit with future income is actually a joke.