The US 10-year Treasury yield fell below the 5% threshold as investors sought safety in government bonds amid a sharp sell-off in artificial intelligence and technology stocks.
On October 22, the benchmark yield dropped nearly 20 basis points to 4.953%, marking its lowest closing level since September 17 and its steepest daily decline since March 2023.
The move reflected a shift in investor sentiment as concerns over the sustainability of AI spending and the potential impact on economic growth overshadowed persistent inflation pressures.
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The sell-off intensified after Meta Platforms fell sharply following its quarterly results and plans to issue a new class of non-voting shares to help fund its AI expansion.
The sell-off was broad across the technology sector. The Nasdaq Composite fell 2.6% to 26,008.86, while the S&P 500 dropped 1.2% to 7,663.43, its worst daily performance since July.
The Dow Jones Industrial Aveedrage edged up 0.02% to 52,867.98, supported by gains outside technology.
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Treasury Yields Fall Across The Curve
The decline extended beyond the benchmark 10-year note. The 30-year Treasury yield fell approximately 15 basis points to 5.286%, while the two-year yield dropped 17.5 basis points to 4.648%.
The moves reflected increased demand for government debt as investors reduced exposure to riskier assets.
Treasuries also benefited from changing expectations for Federal Reserve policy.
According to CME FedWatch data cited by Reuters, the market-implied probability of a rate increase of at least 25 basis points at the Fed's October meeting fell to 7.2%, down from 27.7% a week earlier. The Fed was scheduled to announce its decision on October 28.
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AI Spending Concerns Weigh On Market Sentiment
Investors are increasingly questioning whether the expected returns from massive AI infrastructure investments will justify the associated costs.
Meta's plans to expand AI spending and raise capital through a new class of non-voting shares added to concerns about financing the technology boom. Higher borrowing costs have also made data centres and computing infrastructure more expensive to build.
Meanwhile, rising oil prices have complicated the outlook. Brent crude climbed above $112 a barrel amid concerns that escalating conflict in the Middle East could disrupt supplies, renewing inflation worries even as Treasury yields fell.
The bond rally therefore reflects more than changing interest-rate expectations. Investors are also reassessing risks to technology valuations and economic growth if AI investment loses momentum.
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