Treasuries rallied sharply as a Democratic sweep in this week's US midterm elections triggered a selloff in large US technology stocks, stoking demand for safe-haven assets. Yields fell across maturities by as much as 12 basis points, reaching their lowest levels since early September. The decline began after the US stock market opened, with the Nasdaq 100 index dropping 5.65% and the Philadelphia Semiconductor Index falling 10.09%.
The Treasury market last month posted its biggest gain in more than two years as investors lost confidence in the sustainability of capital spending on artificial-intelligence infrastructure and shifted money from stocks into bonds. Anmol Sinha, fixed income investment director at The Capital Group, said falling chip stocks reflected a possible pullback in the pace of capex spending, which was prompting a market reaction.
The outlook for a US economic slowdown tied to fading enthusiasm for AI investment has also reduced expectations for Federal Reserve rate hikes in the coming months. Concern is growing that Democrats gaining control of Congress by wider-than-anticipated margins could restrain the industry. Traders still lean toward a quarter-point increase when Fed policymakers vote on Dec. 9, though some options activity targeted no move. In the Treasury options market, the 10-year yield, near 4.83%, was the focus of bets that it could fall to 4.7% by the end of next week.
Appetite for large technology companies also competes with Treasuries for cash. Apple Inc. sought about $7 billion in the corporate bond market, while Microsoft Corp., Oracle Corp. and Meta Platforms Inc. sold a combined $50 billion of debt in recent days. Oil price volatility, which has fallen about 15% over three days, continues to shape Treasury yields.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing