US 10-year Treasury yield falls to 5.00% as AI stocks slide
Key Facts
The yield on 10-year US Treasury notes fell to 5.00% during trading on Thursday, October 22, from 5.13% on Wednesday evening, according to the Associated Press, as investors sought safety in government debt. The agency linked the bond buying to a decline in artificial intelligence stocks, which came under pressure during the session. In equities, the technology-heavy Nasdaq Composite fell 2.2% to 26,101.98 points, according to an update published by Investing.com in midmorning New York time. Bond prices also rose at longer maturities, with the 30-year Treasury yield falling to 5.353%. The website said this was the yield's lowest level in about a month. The simultaneous moves in equities and government debt came as demand for safety returned amid turmoil in AI stocks.
Thursday's decline follows a 14.6-basis-point drop in the 10-year Treasury yield in the week ended October 16, according to Investing.com. That weekly decline came despite stronger-than-expected consumer and producer price inflation data. Yields had risen in September, when the 5-year Treasury yield exceeded 5% for the first time since 2007, according to a Reuters report published at the time. Against that backdrop, minutes of the Federal Reserve's previous meeting indicated that private debt issuance to finance AI infrastructure had contributed to a rise in the term premium and Treasury yields. The minutes described this factor as "competition for capital arising from heavy private debt issuance to finance the development of AI infrastructure," linking the sector's financing to government borrowing costs.
On the labor market, US Labor Department data showed seasonally adjusted initial jobless claims fell to 194,000 in the week ended October 17. Claims declined by 6,000 from the previous week, whose reading was revised to 200,000. The four-week moving average also fell to 197,750, from a revised previous average of 198,750. The average declined by 1,000, alongside the drop in the weekly initial claims reading. By contrast, the seasonally adjusted number of people continuing to receive unemployment benefits rose to 1,728,000 in the week ended October 10. That represented an increase of 25,000 from the week ended October 3, whose revised reading was 1,703,000.
The decline in layoffs coincided with continued slow hiring, according to the Associated Press's description of US labor market conditions. The agency said the market was characterized by "low hiring and low firing," a description combining limited job losses with a weak pace of recruitment. Monthly job additions averaged 68,000 from the start of the year through September, according to the agency. On prices, the US Bureau of Labor Statistics reported that annual consumer price inflation accelerated to 3.7% in September. That compared with an annual increase of 3.4% in August, placing accelerating prices alongside slow hiring in the economic backdrop to the bond market moves.
The Federal Reserve raised its target interest rate range by a quarter of a percentage point at its previous meeting, according to its statement issued on September 16. The decision brought the target range to 3.75–4%, leaving 4% as the current upper bound. In a Reuters poll published on Tuesday, October 20, all 100 participating economists expected a rate increase in December. The poll compared that consensus with fewer than half of respondents who had expected an increase in the previous month's survey, marking a sharp shift in economists' expectations. Before December, the Federal Reserve holds its next meeting on October 27–28, according to the Federal Open Market Committee's official schedule.