- US government bond yields fell at least three basis points across the curve, with the 30-year yield touching 5.38%, the lowest since September 23. The yen gained as much as 0.3% to 157.68 per dollar and the Swiss franc rose 0.2%.
- A Bloomberg gauge of Treasury returns has climbed about 1.2% in October, after September’s biggest monthly drop in almost two years. Inflation fears had pushed yields to multi-year highs in recent weeks.
- The rally came even as crude rose after deadly attacks in Saudi Arabia, which normally pushes yields higher through inflation expectations. NAB’s Kenneth Crompton said Treasuries are “feeling some safe-haven flows again” despite oil’s climb.
- The direction for the world’s largest bond market may depend on whether oil-driven inflation fears or worries about the AI stock trade gain the upper hand. Traders have already priced in more Fed rate increases because of elevated energy costs.
What Happened?
Treasuries rose in Asian trading as investors sought shelter after stocks stumbled on renewed concerns about the AI trade, Bloomberg reported. Australian and New Zealand debt also advanced, while a gauge of the dollar was little changed. DBS strategist Eugene Leow said investors are reconsidering AI-related assets and may hedge by seeking safety in Treasuries, with yields still elevated by recent standards. Credit Agricole’s David Forrester said the dip in S&P 500 futures was boosting the yen across the board.
Why It Matters?
The move shows Treasuries regaining their role as a hedge against equity risk, which had faded while inflation fears drove yields to multi-year highs. That matters for multi-asset portfolios, because bonds only diversify stock exposure when they rally on equity selloffs. The tension is that oil is pushing the other way, lifting inflation expectations and the case for more Fed hikes. The long end leading the rally suggests investors are more worried about growth and AI-related losses than about near-term inflation. For equity investors, falling long yields offer some support to valuations even as the AI trade wobbles.
What’s Next?
Watch whether the 30-year holds below its September 23 level, which would confirm a shift in sentiment toward havens. The Fed’s meeting next week will test how policymakers weigh oil against weaker risk appetite. The reaction in S&P 500 futures will show whether the haven bid lasts into the US session.
Affected Tickers and Coins: ZB, ZN, TLT, FXY
Source: Bloomberg
