US technology stocks have suffered a sharp selloff, driving safe-haven capital into the US Treasury market at an accelerated pace, pushing US Treasury yields steadily lower and putting them on track for their largest monthly decline of the year in October.
In early Asian trading on Friday, the Treasury rally extended further, with the yield curve falling 4 to 7 basis points across the board, continuing the decline seen during the US trading session. A Bloomberg index tracking US Treasury returns has risen about 2% in October, while the benchmark 10-year Treasury yield has fallen nearly 40 basis points this month, on pace for its largest monthly gain since February 2025. Government bonds in Australia, Japan, and New Zealand rose in tandem, with each market's benchmark 10-year yield dropping roughly 5 basis points.
Disappointing earnings from tech giants such as Alphabet reinforced market doubts about the outlook for artificial intelligence trades, and combined with news that Binance, the world's largest cryptocurrency exchange, may have been hacked, risk-aversion sentiment has clearly intensified.
Tech Earnings Misses Put Safe-Haven Sentiment in Charge of the Bond Market
Pessimism toward AI-related stocks has been the core driver of the sustained Treasury rally over the past month. Alphabet's earnings falling short of expectations further undermined confidence that massive AI capital spending by hyperscale tech companies can translate into profit growth, triggering a shift of funds into the bond market.
"After this week's tech earnings releases, safe-haven buying returned to the bond market again this morning, with bond prices continuing to climb," said Kenneth Crompton, head of rate strategy at National Australia Bank in Sydney.
Andrew Ticehurst, senior rates strategist at Nomura Securities in Sydney, also noted that "persistent market concerns about the valuations of hyperscale tech companies, combined with Alphabet's disappointing results, are triggering inflows into bonds as a safe haven." He added that given that Federal Reserve Chair Warsh's remarks at the press conference were not notably hawkish and that AI-related worries are likely to persist, this bond rally has room to continue.
Fed Stands Pat as Policy Outlook Grips Market Nerves
Short-term Treasuries have also found support, partly due to the latest remarks from Fed Chair Warsh, who hinted that future rate decisions will depend on upcoming economic data, which the market interpreted as a signal that the policy path remains flexible.
This week, both the Federal Reserve and the Reserve Bank of New Zealand chose to hold rates steady, even as elevated energy costs continue to intensify inflationary pressure. The Bank of Japan also kept its benchmark rate unchanged on Friday. Traders are closely watching the policy direction of major central banks to gauge the bond market's next moves.
Although the market's current focus is on the tech stock selloff, potential risk factors for the bond market cannot be overlooked. With US midterm elections approaching, investors are growing increasingly cautious about whether congressional gridlock can ease concerns over the fiscal trajectory as it has for decades past. The day after election results are announced, the US Treasury will unveil its quarterly refunding plan, which is widely expected to set the tone for a major adjustment in debt management policy and could introduce fresh turbulence for the bond market.
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