- The bond rally gathered pace on Friday. Treasury yields fell at least two basis points across the curve in Asian trading, extending declines from the New York session, and the 10-year yield slipped another 0.07 percentage points to 4.92%.
- October is shaping up as a strong month for bondholders. Benchmark Treasury yields have dropped almost 40 basis points this month, on track for their first monthly decline since February, and a Bloomberg index of Treasury returns is up 2% in October, its biggest monthly gain since February 2025.
- The trigger is a flight from tech. Disappointing results from Alphabet and other tech giants deepened doubts about the AI trade, and a suspected hack of Binance added to the risk aversion; 10-year yields in Australia, Japan and New Zealand fell around five basis points as their bond markets followed.
- Fed policy is adding support. Short-term Treasuries drew a bid after Fed Chair Kevin Warsh said future rate decisions will depend on incoming data, and a Nomura strategist said he did not think Warsh was especially hawkish and expects the rally to extend.
What Happened?
Treasuries extended their rally in Asian trading on Friday as a selloff in US tech stocks pushed investors toward government debt, according to Bloomberg. Yields fell at least two basis points across the curve, and the Financial Times reported that the 10-year US yield dropped another 0.07 percentage points to 4.92%, which analysts called evidence of a rotation out of tech equities into safer assets. Benchmark yields are down almost 40 basis points in October. The Fed and the Reserve Bank of New Zealand both held off on raising rates this week, and the Bank of Japan kept its benchmark rate on hold on Friday.
Why It Matters?
The move marks a sharp shift in sentiment. Souring sentiment around AI-linked stocks has been the main driver of Treasury gains over the past month, and this week’s earnings added fuel: the FT reported that Alphabet fell 13% on Thursday, erasing a record $500 billion of market value, and Nasdaq 100 futures were down 2% ahead of Friday’s open. When equity risk rises and the Fed signals patience, Treasuries regain their role as a haven, which helps borrowers from mortgage holders to the US government itself.
What’s Next?
The next test comes from Washington. The US midterm elections are on Nov. 3, and investors are growing skeptical that a return of gridlock in Congress will ease worries about the US fiscal path the way it has for decades. The day after the vote, the Treasury announces its quarterly refunding plans, which could signal changes in debt-management policy. Until then, bond traders will keep watching tech stocks and incoming data that could shape the Fed’s next move.
Affected Tickers and Coins: TLT, IEF, SHY, GOOGL
Source: Bloomberg, Financial Times
