- The 10-year Treasury yield fell about 17 basis points last week while the Nasdaq 100 dropped 5.5%, the largest same-week decline in both since the April 2025 tariff turmoil.
- The trigger was a sell-off in AI-linked technology stocks, and Treasuries acted as a safe haven, catching investors who had positioned heavily for a deeper bond slump.
- Commodity trading advisers exited bearish Treasury futures positions that Bloomberg described as extremely short, adding fuel to the rally.
- The iShares 20+ Year Treasury Bond ETF (TLT) rose 2.65% last week, from $77.98 on October 9 to $80.05 on October 16, while the ProShares UltraShort 20+ Year Treasury (TBT) fell 5.07%.
- CoreWeave shares fell 25.21% last week, and its five-year credit default swap spread hit a record of about 1,195 basis points on October 15.
- Rate expectations swung sharply, with traders at one point pricing about a 50% chance of a Federal Reserve rate hike in October and still expecting one increase by year-end.
- Investment-grade companies, led by megacap technology, have sold about $1.7 trillion of bonds this year, up about 29% from a year earlier, tying AI build-out financing to bond market conditions.
Quotes
“To paraphrase Mark Twain, rumors of the death of US Treasuries are greatly exaggerated”
“If investors are seeing their AI-linked bonds losing value, they will be less interested in buying new bonds”