Treasuries rallied as selling in AI stocks drove safe-haven demand, pushing the 10-year yield to about 4.90% and weighing on the dollar.
The drop in Treasury yields eases borrowing costs along the curve, giving some respite to rate-sensitive industries and to AI companies whose debt levels have concerned investors. Because of that, the bond rally goes some way toward correcting the very stress that set it off. A weaker dollar is a plus for Asian currencies and dollar-priced commodities. Oil is the biggest risk to the move: with Brent set for a fourth consecutive monthly advance, any worsening of the Iran standoff could reignite inflation worries and send yields higher again. The BoJ's decision later today is the next hurdle, and a hawkish surprise could strengthen the yen versus a softer dollar.
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Oil is ticking higher:
Equities took a beating:
$6bn was taken in a hack:
Yet at least the Treasury market is rebounding.
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For bond investors, the AI slump finally brought something to celebrate, though the mood may not last given rising oil and still-hawkish central banks.
Key points:
US Treasuries rallied on Friday, as another wave of selling in AI stocks drove investors toward safer holdings, Reuters reported. Benchmark yields fell to their lowest levels in over a month, and the US dollar weakened.
The 10-year Treasury yield slipped to roughly 4.90%, and the 30-year yield to approximately 5.26%, both more than one-month lows. Since yields fall when bond prices rise, the decreases point to solid demand for US government debt.
Renewed anxiety about the expense of the AI boom set the rally in motion. Alphabet's results earlier in the week stirred fresh doubts about AI expenditure and dragged wider equity markets down. Poor showings from Amazon and Intel after Thursday's close intensified the strain. With stocks tumbling, Treasuries gained appeal as a haven.
The pattern stood apart from recent market stress, strategists said. In an energy-led risk-off stretch, the dollar would normally strengthen and yields would climb. This time, one strategist based in Singapore said, the US-focused AI concerns arrived alongside lower Treasury yields and a subdued dollar. The implication is that investors view the AI selloff as a risk to US growth and earnings, not as an inflation shock.
The greenback came under pressure from the reduced yields. The dollar index, a measure of the US currency versus a basket of major counterparts, dipped to around 101.8 but stayed headed for a second straight monthly rise.
In other currency markets, the yen held around 157.8 per dollar before the Bank of Japan decision. The BoJ is seen leaving rates at 1.25% while sounding hawkish, and the market has priced in roughly an 80% chance of a December hike. The euro was little changed near $1.12, a day after hitting its lowest since May 2025. The Australian dollar stayed near $0.70 and was poised for a 1.2% monthly gain in October.
The bond-market reprieve could be short-lived. All three central banks, the Federal Reserve, the European Central Bank and the Reserve Bank of New Zealand, kept rates unchanged this week and signalled that their tightening campaigns are not finished, with energy prices near multi-month highs. Khoon Goh, head of Asia research at ANZ, called the current pauses temporary. He said the risk into 2027 is that elevated inflation could force still more hikes. Brent crude is heading for a fourth consecutive monthly advance, its longest such run in more than two years.
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BoJ held rates at 1.25%, said underlying inflation is broadly consistent with its 2% target, and raised its FY2027 core CPI forecast to 2.6%.
Bank of Japan decision imminent; rate hold at 1.25% widely expected, with focus on December hike signals.
Japan factory output surged 2.2% in September, surpassing forecasts. Retail sales fell 0.7%, missing targets, leaving the Bank of Japan with mixed signals.
Tokyo's October CPI came in at 2.8%, beating the 2.7% forecast. September unemployment fell to 2.4% and jobs ratio rose to 1.19.