Yields plummet as fears about AI boom sustainability flare
TLT•U.S. Treasury yields tumbled as an equity selloff renewed concerns about the sustainability of the AI outlook. The 10-year yield fell 19.3 basis points to 4.953%, its biggest daily drop in more than 3½ years, while the odds of a Federal Reserve rate hike next week fell to 7.2%.
1. Treasury yields fall
Treasury yields tumbled as equities sold off amid renewed concerns about the sustainability of the AI outlook, increasing demand for government debt as a safe haven. The Nasdaq fell more than 2%, while Meta shares lost nearly 8% after its quarterly earnings report and announcement of new non-voting shares to help fund its AI expansion.
2. Yields and rate expectations
The 10-year Treasury yield fell 19.3 basis points to 4.953%, on pace for its biggest daily drop since March 10, 2023. The 30-year yield fell 15 basis points to 5.287%, and the two-year yield dropped 18.5 basis points to 4.638%. Markets put the probability of a Federal Reserve rate increase of at least 25 basis points next week at 7.2%, down from 27.7% a week earlier.
3. Auction and economic data
Analysts viewed a $26 billion auction of five-year Treasury Inflation-Protected Securities as solid; non-dealer bidding was 94.5%, compared with a 90.8% average across the previous six auctions. Weekly initial jobless claims fell by 6,000 to a seasonally adjusted 194,000, below economists’ 200,000 estimate.
