Treasuries are regaining their traditional haven status as AI-focused stocks tumble, reversing a trend where bonds offered little protection during tech selloffs this year. A gauge of the inverse relationship between US government bonds and AI stocks has strengthened to levels not seen since last year, signaling investors are fleeing to safety amid concerns over AI investment sustainability and potential economic fallout. The shift is driven by fears of a 'growth scare' and a tech reset, with the Nasdaq 100 and Philadelphia Semiconductor Index posting their biggest declines since June.
Treasuries had their best day in over a year on Thursday, with shorter-dated yields falling as much as 20 basis points. Market turmoil in France and Middle East tensions also boosted demand for US debt, even as Brent crude climbed above $113 a barrel. Analysts note bonds are once again acting as a hedge rather than moving in lockstep with equities.
Softer US data—including weaker consumer confidence, sluggish payrolls, and a drop in pending home sales—suggests higher yields may be slowing the economy, supporting bonds. While some argue AI productivity gains could be disinflationary, others see sustained growth and investment keeping yields high. The market faces a one-two punch from oil and AI liquidation, with defensive positioning building as technical damage mounts.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing