U.S. Treasury yields fell to multi-week lows on Thursday as a rout in AI and technology stocks pushed investors toward government debt. The 10-year yield dropped to 4.899%, while markets still expect the Fed to hold rates at its October meeting.
U.S. Treasury yields tumbled to multi-week lows on Thursday, reversing a sharp multi-month sell-off as a rout in global AI and technology equities sent allocators back into safe-haven government paper.
The benchmark 10-year yield dropped to 4.899%, approaching a three-week low. The two-year yield fell to 4.753%, near a two-week low, and the 30-year yield declined to 5.419%, its lowest in nearly three weeks.
Corporate debt and AI spending worries drive the move
Treasuries had recently traded near 2002 highs above 5.30%. Over recent months, multi-billion-dollar debt sales from AI hyperscalers and semiconductor giants crowded credit markets and pushed corporate spreads wider, according to Investing.com. That supply-driven surge in yields unravelled this week.
Investors are now questioning whether heavy leverage and multi-hundred-billion-dollar capex commitments will deliver near-term returns. The cost of insuring high-grade tech debt against default expanded sharply, prompting a move out of corporate credit and tech equities into U.S. government debt.
Equities took the hit. The Nasdaq Composite dropped nearly 1.9%, and South Korea's KOSPI plummeted 8% overnight, triggering a lower circuit breaker.
Fed expected to hold in October
The shift in Treasuries also reflected a re-evaluation of the Federal Reserve's policy path after the September Consumer Price Index (CPI) report. Headline CPI accelerated to 3.7% YoY and core CPI rose 0.3% MoM, but market participants increasingly view the print as insufficient to force an immediate rate increase at the Fed's late-October meeting.
Money markets continue to price an overwhelming probability that the FOMC holds rates steady at its October 27-28 meeting, bolstered by dovish signals from Fed officials that the central bank can evaluate incoming data before further tightening.
Source: Investing.com
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