Point of View: The Federal Reserve Has Over-Eased, with a 65% Chance of Stagflation in the United States

According to BIT (bit.com) market data, the yield spread between 2-year and 10-year U.S. Treasury bonds narrowed to 17 basis points last week, the narrowest level since early 2025. Currently, the 2-year and 10-year yields stand at around 4.9% and 5.2% respectively. The 10-year yield remains near its highest level since 2007, but as markets expect the Federal Reserve to continue raising interest rates, short-term yields are rising faster, pushing the spread closer to inversion. Markets are now pricing in at least three 25-basis-point rate hikes from the Fed over the next year. Earlier, the rise in long-term yields mainly reflected economic resilience, inflationary pressures, and fiscal risks. However, after the Fed implemented its first rate hike in three years in September, markets have begun to focus more on whether policy rates are already high enough to curb future growth. Historical statistics show that since the 1960s, yield curve inversions have preceded 8 U.S. recessions, with the average inversion of the 2-year/10-year spread occurring about 15 months before a recession, ranging from 6 months to two years. Notably, the 2022 inversion did not lead to a recession. The flattening of the U.S. Treasury yield curve has spilled over to bank stocks: the KBW Bank Index entered a technical correction zone last week, down 10% from its recent high. Zach Griffiths, head of strategy at CreditSights, said that if the curve inverts further or flattens significantly, it will weaken the market’s view that “the U.S. economy is very strong”. Gennadiy Goldberg of TD Securities believes markets have already priced in a considerable number of rate hike expectations, leaving limited room for short-term yields to continue outperforming long-term ones sharply, and the curve may steepen again in the future. The 17-basis-point spread more directly reflects the market’s repricing of policy-tightening risks rather than a foregone conclusion of a recession.

According to Bitget market data, renewed selling of US Treasuries, sparked by rising oil prices after Trump rejected Iran’s proposal, has caused spot gold and silver to decline. Spot gold is trading at $4,215 per ounce, down 1.65% in 24 hours; spot silver stands at $62.44 per ounce, down nearly 3% over the same period.

According to OnchainLens monitoring, a crypto whale has once again deposited 177,520 HYPE tokens, valued at $16.1 million, into a trading platform, potentially signaling an upcoming sell-off. Two days prior, the same address had deposited 89,050 HYPE tokens (worth roughly $8.21 million) into Binance, Kraken, OKX, and Gate.

U.S. Treasury market volatility has reached historic highs. The MOVE Index, a gauge of Treasury market volatility, jumped 19% last week, marking its largest single-week gain since the "Liberation Day" in April 2025. Dubbed the "bond market’s VIX", the index tracks yield volatility of 2-year, 5-year, 10-year, and 30-year U.S. Treasuries, representing its third-largest single-week increase since the 2022 bear market. Over the same period, the 10-year U.S. Treasury yield rose 17 basis points last week to 5.17%, its highest level since June 2007. The 30-year U.S. Treasury yield climbed 16 basis points to break above 5.50%, a first since June 2004. For context, during the week of March 17, 2023—after three regional banks collapsed amid the U.S. banking crisis—the MOVE Index surged 29% in a single week. The current U.S. Treasury market is experiencing near-crisis-level volatility.

According to Bitget's market data, Hong Kong-listed large language model concept stocks continue to decline. Zhipu fell more than 5.6% intraday, while MINIMAX dropped over 10%.

According to on-chain analyst Ai Yi (@ai_9684xtpa), a GNGN-associated address deposited 6,100 ETH worth $16.38 million to Coinbase 8 hours ago. Tracing back, the ETH was bridged from the Robinhood Network to the Ethereum mainnet six days ago, and is likely Robinhood Network fee revenue.