BlockBeats News, June 1st. With the US April PCE rising to 3.8%, core PCE maintaining a high 3.3%, and several Fed officials continuously emphasizing the risk of inflation, even though the Fed has not yet taken action, the bond market has already preemptively completed some tightening. The market is beginning to accept a new reality — high interest rates may persist longer than initially expected, and the financial environment has tightened prematurely.

The core driver behind this repricing still comes from the Middle East situation. Despite Trump's claim that the US and Iran have reached consensus on some issues, in reality, significant differences still exist between the two sides on key issues such as the nuclear program, uranium enrichment disposal, and sovereignty over the Strait of Hormuz. Iran not only refuses to ship enriched uranium abroad but also is prepared to promote the "sovereignty jurisdiction" plan over the Strait of Hormuz in Congress, while the US military continues to take military action around the strait, with even a suspected mine warning in Omani waters. This indicates that the market's expectation of a comprehensive cooling has not yet materialized, and energy supply risks remain unresolved.

It is for this reason that the bond market is helping the Fed complete work that should have been carried out by monetary policy. Recently, US Treasury yields have remained at high levels, with some even saying "the bond market has hiked rates by 75 basis points for Powell." Looking at the simultaneous rise in yields from the two-year to the ten-year Treasury, it is evident that corporate financing costs, mortgage rates, and capital costs have all significantly increased. This phenomenon means that even if the Fed keeps rates unchanged, market funding costs continue to rise, and the global liquidity environment is actually experiencing passive tightening.

There are also more pronounced divisions within the Fed. Kashkari and Bowman believe that the price impact of war still needs time to observe, but Philadelphia Fed President Paulson and Kansas City Fed President Schmidt believe that inflation issues existed long before the war broke out, and further policy tightening needs to be considered. Additionally, the market is beginning to face another layer of risk — institutional trust. Former Fed Chair Powell has rarely issued a public warning that if the government could dismiss Fed officials due to policy disagreements, the Fed's credibility would be fundamentally compromised. This controversy surrounding the Fed's independence has to some extent transcended monetary policy itself and is beginning to affect global investors' assessment of US institutional stability.

As for the crypto market, BTC is currently facing not only a risk appetite issue but also a liquidity test brought on by the simultaneous increase in global funding costs. If non-farm payroll data is strong this week and yields continue to approach 5%, the market will reassess the valuation of risk assets; conversely, if there are signs of a cooling job market, there is an opportunity to alleviate concerns about further tightening. At this stage, what truly dominates the market is no longer whether the Fed will raise rates, but whether the bond market has already preemptively achieved the effect of rate hikes.