US Treasury yields fell sharply on Thursday, approaching three-week lows as a widespread selloff in artificial intelligence (AI) stocks pushed investors toward safer assets. Growing concerns about corporate borrowing and massive AI infrastructure investments intensified demand for US government bonds.
The reversal marked a significant shift in the Treasury market following months of rising yields. Previously, persistent inflation and higher borrowing costs had weakened the appeal of government bonds as a defensive investment.
However, renewed volatility across global stock and credit markets encouraged investors to reconsider their exposure to riskier assets.
US Treasury Yields Fall Across Major Maturities
The benchmark 10-year US Treasury yield declined to approximately 5.08%, approaching its lowest level in three weeks after recently climbing above 5.30%.
Meanwhile, the two-year Treasury yield dropped to around 4.73%, reflecting changing expectations for Federal Reserve monetary policy.
Longer-term bonds also attracted stronger demand. The 30-year Treasury yield fell toward 5.42%, highlighting growing institutional interest in longer-duration government debt.
Because bond prices move inversely to yields, the decline indicated a broad recovery in Treasury prices.
The rally also suggested that US government debt was regaining its traditional role as a safe-haven investment during periods of financial market uncertainty.
AI Debt Concerns Trigger a Flight to Safe-Haven Assets
Mounting uncertainty surrounding corporate borrowing emerged as a major catalyst behind the Treasury market rally.
Over recent months, major technology companies and AI infrastructure providers have raised substantial amounts of debt to finance data centers, semiconductor production and other capital-intensive projects.
However, investors are increasingly questioning whether these enormous investments will generate sufficient profits to justify their financing costs.
Elevated interest rates have made the situation particularly challenging for companies relying heavily on borrowed capital.
Consequently, concerns about excessive debt issuance and potentially disappointing returns have weighed on corporate credit markets.
The cost of insuring debt issued by several AI-exposed companies against default has also increased significantly. Rising credit default swap (CDS) spreads reflect growing investor concerns about financial stability and repayment risks.
As confidence weakened, market participants shifted capital away from technology stocks and corporate bonds toward US Treasuries.
Global Technology Stocks Tumble as Investors Reduce Risk
The reassessment of AI-related investments triggered substantial losses across international equity markets.
The Nasdaq Composite declined nearly 1.9% on Wednesday as investors reduced exposure to technology companies and other growth-sensitive stocks.
Meanwhile, South Korea’s KOSPI index plunged approximately 8% on Thursday, triggering a trading circuit breaker as selling pressure intensified.
The sharp declines reflected growing concerns about highly valued technology companies, rising financing costs and the sustainability of AI-related spending.
These developments accelerated demand for defensive investments, helping US Treasury bonds recover despite ongoing inflation concerns.
Federal Reserve Expected to Hold Rates Despite Hotter Inflation
The Treasury market rally also came as investors reassessed the Federal Reserve’s interest rate outlook following September’s Consumer Price Index (CPI) report.
Headline US inflation accelerated to 3.7% year over year, while core consumer prices increased 0.3% from the previous month.
The stronger inflation figures reinforced expectations that monetary policy could remain restrictive for longer.
Nevertheless, investors continued to anticipate that the Federal Open Market Committee (FOMC) would leave interest rates unchanged at its October 27–28 meeting.
Attention has increasingly shifted toward December, when another interest rate increase remains a possibility if inflation continues to exceed expectations.
Recent comments from Federal Reserve officials suggesting that policymakers have time to assess incoming economic data have also supported expectations of an October pause.
Safe-Haven Demand Overshadows Inflation Risks
Despite persistent inflation and the possibility of further monetary tightening, demand for US Treasuries strengthened as investors prioritized capital preservation.
The latest market movements suggest that concerns about AI-related debt, corporate credit conditions and technology stock valuations are becoming increasingly important drivers of investor sentiment.
However, the sustainability of the Treasury rally remains uncertain. Continued inflationary pressures and potential Federal Reserve rate increases could eventually push borrowing costs higher again.
For now, the sharp decline in US Treasury yields highlights a renewed preference for safer assets as investors reconsider the risks surrounding the AI investment boom.
