Treasuries advanced as trading resumed after a long weekend, with a slide in global equities fueling demand for haven assets. The 10-year US yield slid as much as 5 basis points to about 5.19% on Tuesday as a selloff in heavyweight technology shares saw Asia’s stock benchmark slump about 2%. Futures on the Nasdaq 100 Index also fell 0.9%.
Stock investors are turning cautious on the AI trade, one of the hottest corners of the market this year, heading into earnings season. Rising competition, stretched valuations and concerns over soaring AI spending have raised questions about whether companies can deliver results that justify the sector’s breakneck rally. "Equities under pressure and investors seeking some safety again," said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. "5% may be the first reasonable level to watch" for the 10-year Treasury yield, she said, adding that "we could get there fairly quickly if risk sentiment stays weak and growth concerns build." The benchmark yield hit 5.36% last week, the highest since 2002, amid growing worries over US fiscal deficits and as higher oil prices boosted bets that the Federal Reserve will raise interest rates further to quell inflation. Rising global borrowing costs are fueling concern about economic growth and increasing scrutiny over equity valuations.
Tuesday’s stock losses in Asia followed a selloff in technology stocks on Wall Street that left a US gauge of chip shares at its weakest since mid-September. There was no cash trading in Treasuries globally on Monday due to holidays. "Risk-off on equities," Michael Tang, a rates strategist at Commonwealth Bank of Australia in Sydney, said of the US bonds rally. It "seems like expectation of slower growth" in US corporate earnings ahead, he said.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing