Treasury Yields Tumble, but Long-Term Pressure Persists as AI Selloff Spurs Asset Repricing
Summary
- Bitunix said that despite the sharp drop in US Treasury yields, the long-term Treasury market supply burden remains heavy, making it difficult for the decline in yields to continue.
- It said tensions in the Middle East, concerns over France's fiscal outlook and expanding doubts about AI investment profitability are driving a technology-stock selloff, a reduction in risk-asset exposure and a broader repricing of global asset prices.
- Bitunix said that if inflation pressure from rising oil prices and concerns about slowing AI investment persist, both interest rates and risk-asset prices could face pressure.
Forecast Trend Report by Period
US Treasury yields plunged, reinforcing demand for safe-haven assets, but the decline may be difficult to sustain over the longer term because of the heavy supply burden from government debt issuance, according to an analysis.
Global asset prices are being repriced alongside a recent selloff in technology stocks, crypto-focused media outlet BlockBeats reported on Oct. 23, citing Bitunix analysts.
The yield on the 10-year US Treasury fell 19.3 basis points in a single day to 4.952%, the biggest one-day drop since March 2023. The two-year yield also declined 18.8 basis points.
Bitunix said investors cut exposure to risk assets as tensions in the Middle East, concerns over France's fiscal outlook and doubts about the profitability of artificial intelligence investment intensified at the same time. Short-covering in existing bearish Treasury positions may also have amplified the drop in yields, though the firm said it was difficult to conclude that markets are fully pricing in recession fears.
Long-dated Treasuries still face supply pressure. US federal debt has surpassed $40 trillion, and interest costs for fiscal 2026 are estimated at about $1.36 trillion. The yield at a recent 20-year Treasury auction reached 5.469%, the highest level since 1986.
Gold briefly fell below $4,000 an ounce. Its weakness, despite a softer dollar and lower Treasury yields, suggests investors may also have unwound precious-metals positions to raise liquidity during the technology-stock selloff.
The Japanese yen was also cited as a key variable. Japan's core consumer inflation rate for September came in at 2.1%, while a measure excluding fresh food and energy rose 2.4%, strengthening expectations for a December rate increase by the Bank of Japan.
Bitunix said the key question ahead is whether the latest demand for US Treasuries will remain a short-term flight to safety and bout of short-covering, or whether markets have begun to mark down growth expectations. If inflation pressure from higher oil prices persists alongside concerns about a slowdown in AI investment, both interest rates and risk-asset prices could come under pressure.
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.