Tech Selloff Drives U.S. Treasury Rally, 10-Year Yield Falls to 4.85%
nashnova research
U.S. tech stocks plunged Thursday, sending money into Treasuries for safety. The 10-year yield fell about 4 basis points to 4.85%, with drops of up to 9 bp across the curve — the lowest since early September.
What triggered this Treasury rally?
The Nasdaq 100 dropped 4.75%; the Philadelphia Semiconductor Index plunged 8.83% — chip stocks led the selloff and money rotated into bonds.
This means → the market is pricing in slowing AI-infrastructure capex. The harder chips fell, the more aggressively bonds were bought.
Capital Group fixed-income director Anmol Sinha said the chip selloff "is an extension of the view that capex growth may slow — and it's creating a ripple effect."
How did rate-hike expectations shift?
Traders still nearly fully price a 25 bp hike at the December 9 meeting, but short-end rate options saw bets on no hike at all in December.
In plain terms = the base case hasn't changed — December still likely brings a hike — but real money is now betting on a surprise hold.
Bets on further hikes next year were also trimmed. This reflects how AI-cooling fears are feeding through into rate pricing.
What levels is the options market targeting?
One trade bets the 10-year yield drops to 4.7% by late next week; another, expiring November 20, targets a move to around 4.35%.
This means → some traders are wagering Treasuries have significantly more room to run — from 4.85% to 4.35% would be another 50 bp decline in yield.
Why did pre-market signals point the other way?
Before equities opened, Treasury yields had risen on higher oil prices and stronger-than-expected jobless claims data, signalling a resilient labor market.
In plain terms = morning data said "the economy isn't that weak"; afternoon chip stocks said "AI spending is decelerating" — two forces collided on the same day.
That contrast makes the upcoming October nonfarm payrolls report the next critical signpost.
What signals came from the Fed and corporate bond markets?
Cleveland Fed President Beth Hammack and Richmond Fed President Tom Barkin both backed keeping rates elevated. Hammack dissented last month, pushing for a hike.
Apple issued $7 billion in bonds across seven tranches, spanning two to ten years — corporate supply alongside Treasury demand in a risk-off session.
This reflects the full picture of Thursday's bond market: haven flows lifted government debt while blue-chip issuers locked in funding costs.
What comes next?
Treasuries already posted their largest monthly gain in over two years last month, as confidence in AI capex sustainability wavered.
This means → what happens next depends on two tracks: whether AI capex expectations keep cooling + the direction of economic data before the Fed's December meeting.
Put simply = the deeper chip stocks fall and the weaker data runs, the stronger the case for bonds to keep rallying. A reversal on either track could hit the brakes.
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