NYSE trader
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US Treasury yields sank plunged on Thursday.
It was a remarkable move down in yields given back-to-back hot inflation readings this week.
It’s a sign that investors are flocking back to Treasurys as a haven as high-growth tech stocks teeter.
After dumping bonds for weeks, investors are scrambling back to Treasurys for safety.
The sell-off in government bonds has been the biggest story in markets recently, with yields touching their highest levels in almost a quarter century as inflation and economic fears pushed investors away from government bonds.
But the paradigm shifted on Thursday. Amid a tech rout that’s wiped about $1 trillion from chip stocks this week, and as investors grow cautious on the AI trade heading toward earnings, Treasurys are acting as safe havens again.
Yields were lower across the board on Thursday. The move is especially unusual given hotter-than-expected inflation data this week, which would typically lead investors to price in higher rates and make them more hesitant to hold onto government debt securities.
Investors shrugged consumer and producer inflation figures off, seeking shelter from stock volatility and macro uncertainty.
Treasury yields on Thursday
Maturity Yield Change (in basis points)
2-year 4.75% -4
5-year 4.90% -8
10-year 5.09% -9
30-year 5.42% -10
To markets, the moves are signaling a few things:
Treasurys are a haven trade again. US government bonds have long been thought of as safe havens, but investors have questioned their reputation recently due to concerns about tariffs, ballooning debt and widening deficits, and geopolitical turmoil. The result was a shift away from Treasurys that pushed yields to their highest levels since 2002.
The risk-off sentiment on Thursday is helping bonds “find their footing” again, Ed Yardeni, a market veteran and the president of Yardeni Research, said.
The usual paradigm of stocks and bonds moving in opposite directions has returned . It’s often the case that stock and bonds seeing inverse moves. That pattern appeared to break down in recent months, with stocks and bond yields rising in tandem, a dynamic that worried some strategists. But the latest turn toward Treasurys is a sign that government bonds are behaving as a buffer against volatility in equities. The biggest decline in yields also pared as investors returned bought the dip in stocks.
Interest rate panic may be starting to ease. Investors may have turned to Treasurys partly due to recent dovish Fed comments, strategists on JPMorgan’s markets intelligence team wrote in a client note on Thursday.
The bank pointed to recent remarks from Fed Governor Michelle Bowman, who said she didn’t “feel any urgency” to raise rates immediately when speaking on the sidelines of the IMF-World Bank meetings.
Earlier in the week, New York Fed President John Williams also said he didn’t see any reason for rate hikes in 2027. In early October, Fed vice chair Phillip Jefferson also said the Fed may need to “take more time” to assess the impact of higher yields on inflation.
“The global equity selloff has restored the safe-haven appeal of government bonds,” Rosenberg Research wrote in a client note on Thursday. “Flight-to-quality demand is overwhelming the CPI scare, while markets scale back rate hike expectations across major central banks.”
Investors are still pricing in a 91% chance the Fed will hike rates at least one more time this year, according to the latest reading on the CMEFedWatch tool.
Read the original article on Business Insider
