US Treasury yields ease as AI stock risks weigh on sentiment

what happened

US Treasury yields fell on Tuesday but pulled back from their session lows in choppy trade, Reuters reported. Investors were weighing how higher interest rates could affect AI-linked stocks. Earlier in the week, a slump in AI infrastructure shares over fears that investment could dry up under higher borrowing costs pushed buyers into government debt as a safe haven. Losses in CoreWeave were erased once the broader stock market turned higher after the open.

The 10-year Treasury yield dropped 4 basis points to 5.096%, while the 30-year bond yield fell 5 basis points to 5.423%. The 2-year yield slipped 0.8 basis point to 4.753%. According to CME FedWatch, the probability of a rate hike of at least 25 basis points at the Fed's meeting next week stands at 14.9%, down from 22.1% a week earlier and 57.6% a month ago.

Housing data showed the effect of higher rates. US single-family homebuilding and permits fell sharply in September, and the National Association of Realtors' pending home sales index tumbled 7.3% to 66.0, the lowest level since the series began in 2001. The gap between 2- and 10-year yields was 34.3 basis points. This week the Treasury auctions $13 billion of 20-year bonds on Wednesday and $26 billion of 5-year TIPS on Thursday. The 5-year breakeven rate was 2.379% and the 10-year breakeven 2.346%.

why it matters

Yields remain sensitive to inflation expectations and Fed policy, and the recent AI-driven swings show how quickly equity sentiment can spill into Treasuries. Sizeable auctions this week could add pressure on yields.

market impact

US Treasuries: AI-stock jitters and weaker housing data support demand for bonds and keep yields volatile

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