Macro
10-year Treasury yield falls 19 basis points to 4.95%, its steepest one-day drop since March 2023, as the tech selloff trims Fed hike bets
Investors piled into US government bonds as the Nasdaq slid 2.6%, pulling the benchmark yield back below 5% and reducing the odds of a December rate increase.
HedgeWeekly News Desk ·
The 10-year US Treasury yield ended Thursday at 4.953%, down 19.3 basis points, Reuters reported. That was the largest single-session decline since March 10, 2023, and it took the benchmark back under 5% barely two weeks after it peaked at 5.3645% on October 7, its highest level since April 2002.
The bid for bonds came as equities sold off on renewed doubts over AI spending. The Nasdaq Composite closed down 2.6% at 26,008.86, its worst day in percentage terms since early June, the S&P 500 lost 1.2% and the semiconductor index fell 6.7%. Meta shed 7% after results that raised questions about the cost of its AI build-out, while Brent crude still settled 4% higher at $113.17 a barrel after Houthi attacks in Saudi Arabia.
The rally carried into Asian trading on Friday. Reuters reported the 10-year yield at about 4.96% and the two-year down nearly 19 basis points at about 4.66%, while futures pricing for a December Fed hike slipped to roughly 85% from fully priced. Japan's 10-year yield fell 9 basis points to 2.790% and Australia's 10 basis points to 5.164%. The move did not extend to France, whose 10-year yield climbed to about 5.06%, above Treasuries for the first time since 2013.
Why it matters: for multi-asset funds, Thursday was the first clear session in weeks in which Treasuries cushioned an equity drawdown rather than adding to it, a point Nomura's Charlie McElligott made in describing bonds as working as a hedge again. Whether that holds is contested: ING's Padhraic Garvey expects the 10-year to climb back above 5%, citing inflation, fiscal deficits, the AI investment boom and the coming midterm elections. With oil above $110 and a hike still largely priced for December, the bond-equity correlation is the variable to watch for risk-parity and balanced portfolios.