After weeks of dumping Treasuries, investors piled back into the safest asset amid a brutal selloff in tech stocks.
The yield on the benchmark 10-year Treasury dipped below the 5% level as it declined by 0.2 percentage points, its biggest one-day fall since March 2023. Bond yields drop when bond prices rise.
"It's a classic safe-haven day in the US Treasury market -- and we haven't seen one in quite a while! Tech jitters are driving a flight to quality," wrote Mohamed El-Erian, chief economic advisor at Allianz on X.
Treasuries hadn't played their traditional role as havens in the last couple of years. Bond prices declined after the Feb. 28 U.S.-Israeli attack on Iran and following President Donald Trump's tariff surprise in April 2025 -- and that had placed a negative tint on the asset class.
Before Thursday's wild trading session, the 10 year's yield had been at or above 5% for 19 straight days. But tech stocks sold off Thursday amid concerns that they won't recoup the hundreds of billions of dollars being invested in the artificial-intelligence buildout. Surging energy prices added fuel to the stock selloff. And a lot of that money went right into Treasuries.
What provoked the turnabout? Attractive bond pricing, for one. In the three months ended September, the bond market had suffered its worst quarter since 2022 as the iShares US Treasury Bond exchange-traded fund dropped 3.1%, a huge drop for a supposedly safe investment.
Rising debt levels -- both U.S. government and corporate -- as well as Federal Reserve's decision to move interest rates higher eroded the price of Treasuries for weeks.
"You had the situation where a lot of negative sentiment, a lot of supply, a lot of technical factors...had moved yields higher," said Raman Srivastava, global head of active management at BNY Investments, at a roundtable for reporters. "At some point bonds can be bonds again."
In short, the relentless bond selloff had made Treasuries attractive while the latest macroeconomic jitters were enough to remind investors of the asset's safety.
The other factor is the Fed. Elevated interest rates mean that if the AI trade falters and dents economic growth, the Fed has room to keep interest rates where they are or even cut them.
Markets have been pricing in the worst case scenario with interest rates and now people "are questioning: Well, geez, maybe they don't have to hike rates four times," said Brendan Murphy, head of fixed income, North America at BNY.
None of this means investors have forgotten the lackluster performance of Treasuries in recent years. Cue in 2022, when their prices tumbled along with stocks.
Still, Thursday's market was a reminder of why U.S. government bonds are considered the ultimate safe asset: They are backed by the substantial revenues of the U.S., which for all its fiscal problems, still possesses the world's biggest economy and most robust financial system.
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