AI stock selloff drives Treasury yields to biggest monthly drop since 2023

Key Takeaways

Reuters reported Oct. 30 that U.S. Treasury yields were on track for their biggest monthly fall since late 2023.
A sharp selloff in tech stocks over fears about AI spending pushed investors toward government bonds.
The 10-year Treasury yield closed Oct. 30 at 4.94%. Mortgage markets watch that benchmark closely.
Amazon and Intel quarterly results disappointed investors Oct. 29, and the bond rally kept going into Friday.

The 10-year Treasury yield closed Friday, Oct. 30, at 4.94%. Mortgage lenders watch that number more closely than any other in the bond market. It fell for much of October because investors got nervous about how much money is going into artificial intelligence. For anyone in Fresno, Modesto or Bakersfield shopping for a home loan, the month's bond rally was an AI story.

U.S. Treasuries rallied Friday, and yields were on track for their biggest monthly fall since late 2023, Reuters reported. The wire service said a sharp selloff in tech stocks over fears about AI spending pushed investors toward safer assets.

When stocks get scary, money looks for a place to hide. This month it found bonds.

What changed this week

The latest push came Thursday afternoon. Amazon and Intel reported quarterly results that disappointed investors minutes after the U.S. stock market closed, according to Bloomberg, and Treasuries kept climbing from there. During the Asia session the 10-year yield fell as much as five basis points to 4.89%. It was last that low on Sept. 10. (A basis point is one-hundredth of a percentage point.)

It didn't last all day. The rally stalled in U.S. trading when oil prices jumped, Bloomberg reported, since higher oil can keep inflation elevated.

The 30-year yield dropped to about 5.26%, a one-month low, according to the trading news site investingLive.

How the month built

October didn't start this way. Earlier in the month yields had climbed to multi-year highs, Bloomberg reported, and traders at one point priced in about a 50% chance that the Federal Reserve would raise rates in October.

Then AI shares started sliding. In mid-October the 10-year yield fell about 17 basis points in a single week while the Nasdaq 100 index dropped 5.5%, according to Bloomberg. On Oct. 22, Treasuries had their best day in more than two years as the rout in AI-related shares deepened. Market turmoil in France and tensions in the Middle East added to the rush for safety.

The bond market has its own stake in the AI build-out. Investment-grade companies, led by the biggest tech firms, have sold about $1.7 trillion in bonds this year, up about 29% from a year earlier, according to Bloomberg figures cited in a market commentary.

What it means in the Valley

You don't have to own a share of Amazon to feel this.

The link is borrowing costs. A real estate news site called the Oct. 30 close a modest improvement for the mortgage market "after a month of sharp swings." For a family in Stockton or Visalia trying to lock in a rate, that's the number to watch.

The break may not last. Traders still expect one Fed rate increase by the end of the year and another in 2027, Bloomberg reported. Oil prices, which pushed back against Friday's rally, are still a wild card. And nobody has said yet whether the selling in AI stocks is over.

The shift was already clear by mid-October, when Treasuries led a global bond rally as the selloff in AI shares deepened.

"Risk-off is in the driving seat as tech sells off," said Erik Liem, a rates strategist at Commerzbank.

Central Valley AI is produced by the CVAI Newsdesk team and developed by Kaweah Tech, a regional firm that builds, deploys, and integrates AI solutions for businesses across California's Central Valley.

Source

https://www.fresnobee.com/news/nation-world/national/article317843519.html