US Treasuries wrapped up their monthly biggest rally in a year. The benchmark 10-year yield broke below 4% to its lowest level since October, while the 30-year slipped to 4.63%. Several interconnected forces drove this surge in bond prices.
The primary catalyst was a decisive shift toward risk-off sentiment. Investors sought refuge from mounting global risks and a broad selloff in stocks, with the monthlong surge in Treasuries gathering momentum amid fresh concerns over artificial intelligence's disruptive impact. A Citrini Research paper that gave a scenario of a US recession by 2027 and unemployment exceeding 10% amplified anxiety that AI adoption will cause noticeable economic harm. Escalating geopolitical tensions and worries about hidden vulnerabilities in private credit also contributed to the risk-off sentiment.As equities wobbled, bonds benefited from the classic flight-to-safety trade.
The implications are already tangible — mortgage rates have fallen below 6% for the first time in three years, and Fed rate cuts by May or June are increasingly being priced in. Yet the more alarming signal lies in what falling yields communicate about the broader economy. Should the 10-year continue its descent below 4%, investors may be signaling to the bond market growing concerns about economic growth.
Sources: Morningstar, Bloomberg, CNBC
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