US 10-year yield falls below 5%

U.S. government bonds rallied on Thursday, driving the benchmark 10-year Treasury yield below 5% for the first time since September 23. The 10-year yield fell sharply to just under 5%, dropping to 4.996%, marking its lowest level in nearly a month.

Yields declined across the curve, with five- to 30-year maturities reaching their lowest levels in nearly a month. The two-year Treasury yield, which is closely linked to expectations for Federal Reserve policy, fell to around 4.65%–4.69%. The yield on longer-dated 30-year Treasurys declined to about 5.30%–5.32%, as buying extended from short-term notes to long bonds.

The drop in yields came as investors moved into safe havens amid a steep sell-off in equities, particularly in technology and AI-related stocks. Concerns about artificial intelligence investments and pressure on the broader AI trade contributed to the risk-off shift. Comments highlighting strong demand for AI-related infrastructure but scarce capital added to unease in technology markets and reinforced the flight to Treasurys.

Rising tensions in the Middle East further supported demand for longer-dated U.S. government debt, with the 30-year yield often sensitive to geopolitical developments. The combination of equity market weakness and geopolitical concerns tightened financial conditions in risk assets and increased the appeal of U.S. sovereign bonds as a perceived safe store of value.

Alongside equity and geopolitical factors, fading expectations for additional Federal Reserve interest-rate hikes added momentum to the bond rally. Lower anticipated policy rates tend to support Treasury prices and push yields down, particularly at the front and intermediate parts of the curve. The decline of more than 17 basis points in the two-year yield reflected this shift in rate expectations.

The rally trimmed yields across maturities by as much as 16 basis points and pulled five- to 30-year yields to near one-month lows. Increased demand for U.S. government debt lowered the expected yield for a five-year Treasury inflation-protected securities auction scheduled for 1 p.m. New York time, underscoring how the move in nominal bonds spilled over into inflation-linked securities.

The recent gains in bond prices have translated into improved performance for broad Treasury portfolios. A Bloomberg gauge of returns on Treasurys has climbed about 1.2% in October. This follows what was described as the biggest monthly drop in almost two years in September, indicating a notable reversal in investor sentiment toward U.S. government debt over the past few weeks.