During Thursday's Asian trading session, US Treasuries rose, with the Japanese yen and Swiss franc strengthening in tandem, as investors rushed into safe-haven assets after stock markets fell on renewed concerns about AI trading.
Yields on US Treasuries fell by at least 3 basis points across the entire curve, with the 30-year yield touching 5.38%, its lowest level since September 23. Australian and New Zealand government bonds also advanced, while the yen gained as much as 0.3% against the dollar.
Eugene Leow, senior rates strategist at DBS Bank, said: "Market sentiment seems to have become more fragile recently as investors re-examine AI-related assets. Caution over profitability and return on investment appears to be quietly spreading. Since US yields remain elevated by recent standards, investors may want to hedge some risk by buying US Treasuries as a safe haven."
The stock market decline has rekindled the safe-haven status of US Treasuries, after concerns about accelerating inflation had pushed yields to multi-year highs in recent weeks. The direction of the world's largest government bond market may depend in part on which prevails: elevated oil prices or worries about AI stock trading.
The buying of US debt comes as a deadly attack in Saudi Arabia clouds the supply outlook, driving crude oil prices higher. High energy costs have deepened inflation concerns and prompted traders to bet that the Federal Reserve and other global central banks will raise interest rates further. The Bloomberg US Treasury Return Index has risen about 1.2% in October after posting its largest monthly decline in nearly two years in September.
Kenneth Crompton, head of rates strategy at National Australia Bank, said: "Although oil prices are slowly recovering, US Treasuries are once again feeling inflows of safe-haven funds."
Australia's 10-year government bond yield fell 3 basis points to 5.25%, while New Zealand's 2-year government bond yield slipped 2 basis points to 3.91%. The yen appreciated 0.3% against the dollar to 157.68, the Swiss franc rose 0.2%, and the dollar index was little changed.
David Forrester, strategist at Credit Agricole, said: "The decline in S&P 500 futures is boosting the yen. Importantly, this rise is broad-based, even strengthening against the dollar, demonstrating the yen's safe-haven status when the AI boom is disrupted."
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