U.S. Treasury prices rose on Friday as a selloff in technology stocks drove investors toward government bonds, sending the benchmark 10-year yield to its steepest monthly decline since December 2023. The yield fell 36 basis points during October, its largest one-month drop in nearly three years, according to the market report.
The 10-year yield also declined for a fourth consecutive week, the longest run of weekly decreases in a year. The move came as investors reassessed the outlook for technology companies and the cost of the artificial-intelligence infrastructure buildout. The Nasdaq fell more than 2% after quarterly reports from Amazon and Intel unsettled investors already focused on the large amounts of capital being directed toward AI.
A sharp reversal in bond-market sentiment
The Treasury rally followed a steep selloff in recent weeks that had driven yields to multi-decade highs. That earlier move reflected concern about higher energy costs and the increase in U.S. government debt. The latest trading pattern shows a reversal in sentiment, with risks that had previously been viewed as supportive of higher yields becoming a source of concern for rates investors.
“The last few weeks have just been an absolute sentiment shift,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.
Goldberg said risks had “really started to re-emerge” after a period when market participants had viewed developments largely as an upside risk to interest rates. JoAnne Bianco, partner and senior investment strategist at BondBloxx Investment Management, said the bond-market move should not be read as a change toward a more accommodative Federal Reserve stance.
“It’s not like we think that this should be interpreted as a dovish shift,” Bianco said.
December rate increase remains in focus
The Federal Reserve left interest rates unchanged during the week and upgraded its assessment of the economy. Even after the bond rally, futures markets continued to assign a substantial probability to a rate increase at the Fed’s December meeting. The CME FedWatch tool showed about a 70% chance of a quarter-point December hike on Friday, down from about 78% late Thursday.
Dallas Fed President Lorie Logan said Friday that the central bank needs to raise rates at least two more times to bring inflation under control. The report also cited the Fed’s September rate increase, described as its first in three years, as part of the central bank’s response to elevated inflation linked in part to high energy prices and the AI boom.
- 10-year Treasury yield: down 36 basis points in October
- Weekly trend: fourth consecutive week of declines
- Nasdaq: down more than 2% after Amazon and Intel earnings
- December Fed hike probability: about 70% in CME FedWatch pricing
Bianco said the possibility of a December increase remained active, while Goldberg described the central question for rates investors as whether concerns about AI spending would persist or prove temporary. The competing forces—stronger expectations for continued monetary tightening and renewed demand for Treasuries as a defensive asset—left bond prices higher even as investors continued to assess the economy and corporate spending on artificial intelligence.
