During Friday’s Asian trading session, the U.S. Treasury rally accelerated again, with yields across maturities falling by at least 2 basis points, extending the decline from the previous trading day. This round of global asset rotation was triggered by AI technology stocks’ earnings falling short of expectations, causing a rapid pullback in market risk appetite as a large volume of safe-haven capital flowed into U.S. Treasuries, driving synchronous gains in global sovereign bonds.
Ten-year government bond yields in Australia, Japan, and New Zealand fell by approximately 5 basis points in tandem, with global bond markets enjoying a synchronized rally. As the anchor for global asset pricing, the 10-year U.S. Treasury yield has declined by nearly 40 basis points cumulatively in October, on track for its first monthly plunge since February; the Bloomberg U.S. Treasury Index has risen 2% this month and may post its best monthly return of the year. Safe-haven demand has become the core driver of this round of bond market strength.
The trigger for this round of risk asset selling came from disappointing financial reports from leading technology companies. Cash flow performance at AI cloud computing giants such as Google parent Alphabet (GOOG) and Amazon (AMZN) fell far below market expectations, intensifying investor concerns about an AI bubble burst. Combined with a suspected hack at Binance, market risk-aversion sentiment further intensified. Nasdaq futures in the U.S. expanded their Asian session losses to over 2%, Intel (INTC) plunged 23% in overnight trading, and Nvidia (NVDA), Micron Technology (MU), and Oracle (ORCL) moved lower in tandem. Dragged down by the memory chip sector, South Korea’s KOSPI index tumbled over 5.6%, triggering trading limits intraday; Japan’s Nikkei 225 also fell nearly 3%, with Asia-Pacific technology sectors under broad pressure.
Federal Reserve official Kevin Warsh stated that he would not preset an aggressive rate hike path and that subsequent rate decisions would rely on economic data, providing policy support for the U.S. Treasury rally. Meanwhile, the Federal Reserve and the Reserve Bank of New Zealand paused rate hikes this week, and the market widely bets that the Bank of Japan will likewise keep rates unchanged, further consolidating the bullish bond sentiment.
Beyond the short-term safe-haven rally, the bond market still needs to confront new risks. U.S. midterm elections are approaching, and congressional political gridlock could once again spark market concerns about the U.S. fiscal deficit. The day after the election, the U.S. Treasury Department will release its quarterly refunding plan, and debt issuance arrangements will directly affect the long-term trajectory of U.S. Treasuries. Although falling Treasury yields can lower the benchmark corporate financing rate, credit spreads for some technology companies continue to widen, and overall financing costs have not noticeably declined. Investors remain watchful over whether massive AI investments can translate into profits, and valuation pressure on technology stocks is unlikely to be fully eliminated in the near term.
