US 10Y Bond Yield Hits 4-week Low

The yield on the US 10-year Treasury note rose to 5% on Friday, following a 17bps drop in the previous session, which was the largest single-day decline in more than a year. Despite the modest rebound, cautious sentiment persisted as oil prices climbed further amid concerns over a potential escalation of hostilities in the Middle East, with the US midterm elections also less than two weeks away. Meanwhile, concerns over heavy AI-related spending continued to weigh on sentiment. The Federal Reserve is set to announce its monetary policy decision next week, with markets pricing in a roughly 91% probability of rates remaining unchanged. Meanwhile, the odds of a 25bps rate hike in December stood at around 76%.

The yield on the US 10-year Treasury note held around 4.97% on Friday after falling by more than 10 basis points in the previous session to its lowest level in a month. The decline came as a deepening selloff in technology and artificial intelligence stocks prompted investors to seek safer assets, including government bonds. Growing concerns over the sustainability of AI investments, a key driver of US economic growth, also prompted markets to scale back expectations for further Federal Reserve rate hikes. Markets are now pricing in roughly a 91% probability that the Fed will leave interest rates unchanged next week, while the likelihood of a rate increase in December stands at around 80%. Meanwhile, escalating tensions in the Middle East, amid reports that the US and Israel are preparing potential renewed strikes against Iran after the midterm elections, further strengthened demand for safe-haven assets.

The yield on the US 10-year Treasury note fell by more than 10 basis points to almost 5%, its lowest level in about a month, as a broad flight to safety triggered by renewed equity market volatility boosted demand for government bonds. Concerns over stretched AI valuations and elevated investment spending weighed on risk appetite. Adding to woes, escalating geopolitical tensions in the Middle East, amid reports that the US and Israel are preparing further strikes on Iran after the midterm elections, added to safe-haven demand. Meanwhile, the Federal Reserve is set to announce its monetary policy decision next week. Markets are pricing in an approximately 90% probability that the Fed will leave interest rates unchanged, but the odds of a 25-basis-point rate hike in December have risen to around 76%. On the data front, the latest jobless claims report showed initial claims falling to their lowest level since July.