US Treasuries are heading for their best week since February as worries over the AI boom and softer rate-rise expectations halt a months-long global bond sell-off. The 10-year yield fell to 5.08% on Friday, down from above 5.3% last week.
The yield on 10-year US Treasuries fell to 5.08% on Friday, down 0.17 percentage points this week, as a sell-off in tech stocks resumed. Last week, the same yield had topped 5.3%, its highest since 2002, from below 4% in late February.
Tech sell-off drives a rush into safe assets
Government bonds rebounded as investors sought safe assets while concerns over the sustainability of the AI boom hit global chip stocks. The Nasdaq 100 fell 1% in morning trading on Friday, taking its weekly losses to 4%.
Chipmakers and so-called neocloud companies led the declines again. Micron fell 3.6%, while CoreWeave, which has also suffered a heavy sell-off in its debt, lost another 7.5%.
According to Royal London Asset Management's Trevor Greetham: "Higher yields have attracted government bond buyers", alongside a risk-off tone in tech stocks and a sense that the Federal Reserve may hold rates in October.
Rate bets shift after US inflation data
The rebound came despite data showing US inflation jumped to 3.7% in September as the Middle Eastern conflict pushed up fuel prices. Traders first dumped bonds, and at one point on Wednesday markets priced in four quarter-point rate rises over the coming year.
Then the selling spilled into equities and the bond moves reversed. Futures markets now indicate three rate increases over the next 12 months, after Fed chair Kevin Warsh signalled at an IMF summit in Bangkok that the higher-than-expected inflation had not changed his views on the US economy.
Europe sees borrowing costs ease
The reversal also brought relief to European economies. UK 10-year borrowing costs fell back to 5.37% from more than 5.5% earlier this month, while Italian 10-year yields stand at 4.48%, down from nearly 4.75%.
Jefferies' Mohit Kumar said the move was driven by investor concerns over the AI cycle and position unwinds.
Source: Financial Times
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