(Some good news!) Treasuries rally as AI selloff drives flight to safety, 10-year yield at one-month low
Lower Treasury yields ease financing costs across the curve, offering some relief to rate-sensitive sectors and to the AI firms whose borrowing has worried investors.
That makes the bond rally partly self-correcting for the very stress that triggered it.
A softer dollar supports Asian currencies and commodities priced in dollars.
Oil remains the main threat to the rally: with Brent heading for a fourth straight monthly gain, any escalation in the Iran conflict could quickly revive inflation fears and push yields back up.
The BoJ decision later today is the next test, and a hawkish surprise could firm the yen against a softer dollar.
--- Oil is higher: Vessel on fire in Strait of Hormuz after incident near Oman, cause "unknown" (LOL) Stocks slammed: Earnings bloodbath: Intel crashes over 22%, Amazon over 12%.
What's coming next? $6bn stolen in a hack: Chainalysis estimates $5.9B stolen in suspected Binance hack, nearly 4 times Bybit But ...
at least Treasuries are bouncing!
--- The AI selloff finally gave bond investors something to cheer, though with oil still climbing and central banks still hawkish, the celebration may be brief.
Summary: The US 10-year Treasury yield fell to around 4.90% and the 30-year to about 5.26%, both one-month lows The rally was driven by safe-haven buying amid renewed selling in AI stocks after Alphabet, Amazon and Intel results Strategists noted that AI concerns lowered yields and softened the dollar, unlike energy-driven risk-off episodes The dollar index edged down to around 101.8 but is on track for a second straight monthly gain The yen held near 157.8 ahead of the BoJ, with about an 80% chance of a December hike priced ANZ’s Khoon Goh sees this week’s central bank pauses as temporary, with more hikes possible in 2027 US Treasuries rallied as a fresh wave of selling in artificial intelligence stocks sent investors in search of safety, Reuters reported on Friday.
The rally pushed benchmark yields to their lowest levels in more than a month and weighed on the US dollar.
The yield on the 10-year Treasury note fell to around 4.90%, while the 30-year yield dropped to about 5.26%, both at more than one-month lows.
Bond yields move inversely to prices, so the declines reflect strong buying of US government debt.
The rally was triggered by renewed concern over the cost of the AI boom.
Results from Alphabet earlier in the week revived worries about AI spending and pulled broader stock markets lower.
Disappointing results from Amazon and Intel after Thursday’s close added to the pressure.
As equities sold off, safe-haven bonds became more attractive.
Strategists noted that the pattern differed from recent bouts of market stress.
An energy-driven risk-off episode would typically lift the dollar and push yields higher.
This time, one Singapore-based strategist said, the US-focused AI concerns came with lower Treasury yields and a softer or subdued dollar.
That suggests investors are treating the AI selloff as a US growth and earnings risk rather than an inflation shock.
The lower yields weighed on the greenback.
The dollar index, which tracks the US currency against a basket of major peers, edged down to around 101.8, although it remained on course for a second consecutive monthly gain.
Elsewhere in currency markets, the yen was steady near 157.8 per dollar ahead of the Bank of Japan’s policy decision.
The central bank is expected to hold rates at 1.25% with a hawkish tone, and markets are pricing about an 80% chance of a hike in December.
The euro was flat near $1.12 after touching its lowest level since May 2025 in the previous session.
The Australian dollar held around $0.70, on track for a 1.2% gain in October.
The relief for bond markets may prove limited.
The Federal Reserve, the European Central Bank and the Reserve Bank of New Zealand all held rates steady this week, but have signalled their tightening cycles are not over, with energy prices near multi-month highs.
Khoon Goh, head of Asia research at ANZ, described the current pauses as temporary.
He said the risk heading into 2027 is that elevated inflation could bring even more hikes.
Brent crude is on track for its fourth straight monthly gain, the longest run in more than two years.
This article was written by Eamonn Sheridan at investinglive.com.