US Treasury market volatility has intensified due to uncertainties surrounding the government's fiscal situation and market concerns that Friday's non-farm payroll data could impact Federal Reserve rate cut expectations.

According to an Intercontinental Exchange indicator, the one-month implied volatility of US Treasuries surged 12.12 points over the past three days, marking the largest consecutive increase since April 2nd "Liberation Day" when Trump announced reciprocal tariffs.

Unless tariff revenues persist, the Trump administration's spending and tax reduction plans are expected to deteriorate America's fiscal position. Additionally, Friday's non-farm employment report is being closely watched by markets for Federal Reserve policy clues, as officials will soon enter a blackout period ahead of the September 17th interest rate decision.

Trump's attempts to exert greater control over the Federal Reserve have also heightened market unease, including efforts to remove board member Lisa Cook. JPMorgan strategists noted that these concerns are more reflected in rates, term premiums, and equities than in currencies.

Eugene Leow, Senior Interest Rate Strategist at DBS Bank in Singapore, stated that the rise in Treasury volatility is "likely due to high uncertainty surrounding non-farm data, compounded by concerns about Fed independence." He added, "Markets may also be worried about September seasonal factors."

Data compiled by Bloomberg shows that bonds with maturities of ten years and longer have recorded their largest monthly declines in September over the past decade, suggesting seasonal factors may present challenges for this asset class.

Due to concerns about the US government's fiscal condition and elevated inflation, US 30-year Treasury yields climbed to nearly 5% on Wednesday, reaching their highest level since July. Subsequently, weaker-than-expected US job openings data prompted traders to almost fully price in rate cuts this month, causing yields to decline.

"In terms of absolute direction, we maintain considerable flexibility," said Shinji Kunibe, Chief Global Fixed Income Portfolio Manager at Sumitomo Mitsui DS Asset Management. "If we become too short, like yesterday, we might be forced to exit positions, so we don't take on too much directional exposure."