The last time such a massive sell-off of US Treasury bonds occurred as the Federal Reserve began cutting interest rates, then-Fed Chairman Greenspan was carefully planning for a rare soft landing.

Zhixintong Finance App noted that since the Fed's first rate cut on September 18, 2020, the two-year Treasury yield has climbed 34 basis points. In 1995, a similar increase in yield occurred, when the Fed led by Greenspan successfully cooled down the economy without causing a recession. In the rate-cut cycle since 1989, a month after the Fed started cutting rates, the two-year Treasury yield on average dropped by 15 basis points.

Deutsche Bank interest rate strategist Steven Zeng said the rise in yields "reflects a reduced probability of an economic recession." "The data is quite strong. The Fed may slow down its rate cuts."

The latest U.S. bond sell-off is similar to the sell-off after the Fed rate cut in 1995.

The recent rise in yields indicates that the resilience of the U.S. economy and the activity of the financial markets have limited Fed Chairman Powell's ability to significantly cut interest rates. In the interest rate swap market, traders expect the Fed to lower rates by 128 basis points before September 2025, compared to a decrease of about 195 basis points predicted about a month ago.

Due to investors weighing the possibility of a slowdown in rate cuts, global bond markets continued to decline this week, with U.S. Treasury bonds up only 1.7% in total return so far this year as of Monday. In the same period, U.S. Treasury bills rose by 4.3%.

On Tuesday, the slight selling continued, pushing the 10-year Treasury yield up by about 1 basis point, compared to the 11 basis point increase in yield on Monday. The recent rise has pushed the benchmark yield to around 4.2%, higher than the 15-month low of 3.6% on September 17 (just the day before the Fed lowered borrowing costs by half a basis point).

Tuesday's trading activities indicated that the market sentiment continues to be bearish, with a series of large trades in the 10-year US Treasury futures market. In the options market, a trade was aiming for the 10-year government bond yield to rise to around 4.75% upon expiration of the options on November 22nd.

In 1995, after a significant rate hike by the Federal Reserve, there were only three rate cuts in the following six months, bringing the rate down from 6% to 5.25%. After the first rate cut that year, the 10-year government bond yield surged by over 100 basis points in the following 12 months, while the 2-year government bond yield increased by 90 basis points.

This rise in yield also reflects growing concerns that the Republican party may potentially control both the White House and Congress in the November 5th elections, which might exacerbate the federal deficit and inflation.

Volatility has also intensified. The Intercontinental Exchange Bank of America Move Index, which tracks expected volatility in US government bonds over the next month, has climbed to the highest level this year.